NEW YORK - VACANT office space in Manhattan rose by a third this year, as the financial sector went into meltdown and thousands of workers in New York lost jobs, a major real estate company said on Tuesday.

Vacancies accounted for 7.4 per cent of stock in the third quarter of 2008, compared to 5.7 per cent in the same period of 2007, announced the firm, Cushman and Wakefield.

'We believe we hit the inflection point of the market in August,' Mr Joseph Harbert, chief operating officer for Cushman and Wakefield in New York Metro Region, said in a statement.

'The top of the market was reached and now we're beginning to soften. We're coming down from historic highs, but the question remains how far we will fall.'

Turmoil on Wall Street and the disappearance or takeover of major financial operators also prompted a 72 per cent increase, year-on-year, in spare sub-lease space. This was the biggest jump in nearly four years, according to the study.

'The crisis in the credit markets has made it more difficult to run a business, causing many tenants to rethink their space needs,' Mr Harbert said.

Rental rates in what has long been one of the world's most feverish property markets were static at US$729.70 (S$1,071) per sq m, a rise of just two per cent.

'Deals are still getting done, but they are taking much longer to complete, as there are more space options and negotiations are proceeding more slowly,' Mr Harbert said.

'There is clearly uncertainty about the near future.'

Property sales have also taken a big hit.

The number of transactions worth more than US$10 million fell 55 per cent year-on-year, Cushman and Wakefield said.

Sales overall by the end of the third quarter totaled US$18.7 billion, down from US$42.4 billion at the same stage last year. -- AFP