In a statement, CB Richard Ellis, which represents Lehman and AIG, conceded the Manhattan office market "is now in uncharted territory."
A Real Estate Board of New York management meeting set for 8:30 this morning was moved up to 8 a.m. to discuss the situation -"an added item to the agenda," REBNY president Steven Spinola said.
The end of Lehman poses issues for many buildings where the firm was an equity partner - as, for example, at L&L Holding Co.'s 200 Fifth Ave., the former Toy Building now being converted into an office address that will be home to Grey Group.
L&L co-founder David Levinson said his company has a $600 million construction loan from a consortium that does not include Lehman, but he and his partners will need to buy Lehman's equity interest back, "although it will probably take a few months to sort out."
Lehman has 2.69 million square feet of Manhattan office space. According to Jones Lang LaSalle, a worst-case scenario in which all the Lehman space became vacant would boost Midtown Class A vacancy from 8.4 percent as of last June to 12.1 percent by the first quarter of 2009.
Jones Lang research director James Del Monte said that prediction takes into account 15,000 jobs already estimated to have been lost prior to this week's developments - but they don't include losses certain to result from Merrill Lynch's absorption by BofA.
However, certain Lehman units, such as asset manager Neuberger Berman, might survive. Should only half of Lehman's current total space become available, JLL foresees Midtown class-A vacancy rising to 11.3 percent by early next year.
Donald Trump said, "Do you believe it all? It's going to be an interesting period - with these companies going bad, it's going to be a difficult time for New York City."
"There's no question we're going to have a statistical adjustment in the market," said Jones Lang LaSalle regional president Peter Riguardi, who represents both Merrill Lynch and Bank of America. "But I'm not of the mindset that it's the end of the world."
Newmark Knight Frank CEO Barry Gosin said, "There will be a correction weighted toward tenants. Prices will come down, but it is not going to be devastating."
The chaos potentially affects several buildings:
* 745 SEVENTH AVE. Lehman's headquarters tower (1 million square feet) is likely to be sold.
But placing a value on it is not easy. Studley investment sale specialist Woody Heller estimated it might fetch between $600-$800 million if sold vacant - figures that might sound low, but reflect the fact that new tenants would need to reconfigure floors tailored to investment banking.
Heller pointed out another complication: Lehman has a ground lease with the Rockefeller Group, which developed the tower for original user Morgan Stanley.
As Rockefeller stated in 1998, "The transaction calls for RGI to lease the land to Morgan Stanley. After 30 years, RGI and Morgan Stanley will form a joint venture which will own the building."
Lehman inherited those terms when it bought the tower from Morgan Stanley after 9/11. But with Lehman heading into bankruptcy, it isn't clear that a buyer would retain co-venture status.
* WORLD FINANCIAL CENTER, Towers 2 and 4. Merrill Lynch has about 2.6 million square feet there. The firm has been in talks with landlord Brookfield Properties about extending its lease, which expires in 2013.
But now, Merrill's absorption by BofA is bound to result in a major reduction in its space needs.
* 70 PINE ST. AIG's 1932 art deco skyline fixture is the most important of the insurer's downtown locations - because if the firm were to disappear, it would be hard to find another commercial user for the beautiful but obsolete structure.
Trump, who owns 40 Wall St. nearby, said, "If AIG went down, it would have unbelievable reverberations. They have space all over Downtown."
* 11 TIMES SQUARE. SJP Properties' 1.2 million square- foot tower, now rising at Eighth Avenue and 42nd Street, has not yet signed tenants, but was counting on the fact that it's the only new product in Midtown.
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