Jan. 6 (Bloomberg) -- Manhattan apartment sales fell for the fourth straight quarter and office rents declined the most in at least two decades as the recession hit New York City.

Fourth-quarter apartment transactions dropped 9.4 percent from a year earlier as prices for the most expensive units declined, appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report today. Office rents for the period slid 4.8 percent to $69.44 a square foot from the third quarter, commercial broker Cushman & Wakefield Inc. said.

The U.S. recession that began in December 2007 and the global credit crisis have claimed Bear Stearns Cos. and Lehman Brothers Holdings Inc. and may cost the city as many as 175,000 jobs. Finance jobs drive the Manhattan market. Employment at Wall Street investment banks accounted for almost 15 percent of the city’s total privately paid wages in the first quarter of 2006, according to the U.S. Bureau of Labor Statistics.

“This quarter was like no other quarter we’ve ever seen before,” said Joseph Harbert, chief operating officer of Cushman’s New York metro region, in an interview. “It’s as if someone let the helium out of the balloon. The downfall of Lehman really changed the real estate consumer’s psychology, and put everyone in a cautious, wait-and-see, don’t-make-a-decision attitude.”

Stocks Slide

The fourth-quarter real estate reports are the first to reflect the deepest yearly drop for U.S. stocks since the Great Depression. In 2008, the Standard & Poor’s 500 Index lost 38.5 percent, led by shares of Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc. The U.S. median home price fell 13 percent in November from a year ago, the biggest drop on record, the National Association of Realtors said.

In the Manhattan residential market, the overall median sales price rose 5.9 percent, Miller Samuel and Prudential said. Luxury prices dropped 3.9 percent and the median for all resale apartments slid 3.6 percent.

The inventory of apartments listed for sale rose almost 40 percent from a year ago to 9,081 units. Apartments sat on the market for an average 159 days before selling in the fourth quarter, up 21 percent from a year earlier.

In separate reports today, brokerage Brown Harris Stevens Inc. said the overall median sale price in Manhattan rose 8.1 percent to $895,000 in the fourth quarter from a year earlier and Corcoran Group said it rose 3 percent to $937,000.

Luxury Sags

In the luxury market, defined as the top 10 percent of sales by price, the median apartment price fell to $4.13 million in the fourth quarter from $4.3 million in the fourth quarter of 2007. Inventory rose 26 percent to 1,730 apartments. Luxury units stayed on the market 169 days, 52 more days than the same period a year earlier.

“The end of the year marked the beginning of Manhattan’s entry into a new kind of market,” said Jonathan Miller, Miller Samuel’s chief executive. “For all of 2008 we were seeing a fairly sharp decline in the number of transactions every quarter. Now we are starting to see prices decline.”

The median in the Miller Samuel-Prudential survey rose to $900,000 in the fourth quarter. The median price of resale apartments declined to $732,500 from $760,000. The median for new developments rose 5 percent to $1.26 million.

In the office market, fourth-quarter rents dropped 4.8 percent to $69.44 a square foot from the third quarter, broker Cushman & Wakefield Inc. said in a report today.

Class A Space

The decline was led by Class A offices, particularly in Midtown Manhattan, where financial firms have been migrating from Wall Street. Rents for such offices, the most expensive, best appointed spaces in the market, fell by 5.8 percent to $80.59 a square foot in Manhattan. For Midtown’s top-tier offices, the decline was 7.2 percent to $92.59 a square foot.

“Class A is the space that is most affected by the financial services sector,” Harbert said.

Leasing slid to the lowest since 2001 as companies signed up for 19.1 million feet of space last year. Lehman’s bankruptcy, the acquisition of Merrill Lynch & Co. and the steepest plunge in U.S. stocks since the Great Depression last year contributed to the highest vacancy rates since May 2006.

The amount of space tenants put on the market for sublease more than doubled last year to 8.2 million square feet. More than 31 million feet of space is now available in Manhattan, a 43 percent jump over year-end availability in 2007.

Across the U.S., office vacancies rose to 14.4 percent in the fourth quarter, the highest in three years, according to a report from Reis Inc., a New York-based real estate research firm. Asking rents fell 0.3 percent, the company said.

To contact the reporters on this story: Peter S. Green in New York at psgreen@bloomberg.net; David M. Levitt in New York at dlevitt@bloomberg.net.

Last Updated: January 6, 2009 14:42 EST