Jan. 6 (Bloomberg) -- Manhattan office rents fell the most in at least two decades last quarter as securities firms cut jobs and tenants leased less space.

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.

Leasing slid to the lowest since 2001 as companies signed up for 19.1 million feet of space last year. Lehman Brothers Holdings Inc.’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.

“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.”

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.

Rent Discounts

In another report, broker Studley Inc. said the availability of offices in Manhattan rose by 1.5 percentage points to 10.4 percent in the fourth quarter from the third. That’s the biggest increase since the third quarter of 2001. The availability measures vacancies plus properties scheduled to become empty within the next year.

Tenants are gaining the upper hand in negotiations with landlords and winning discounts on rents, said Marisa Manley, president of Commercial Tenant Real Estate Representation Ltd., a brokerage which exclusively serves companies seeking space.

“We are seeing nominal discounts of 15 percent or more” and incentives that may add up to a year and a half of base rent, Manley said. “So we’re seeing effective rents which are very, very different from the quoted asking rents.”

The lack of leasing and falling rents sent shares of building owners reeling in 2008. The Bloomberg Office REIT index fell 42 percent, the biggest decline since the measure started in 1994.

Maguire Properties Inc. and SL Green Realty Corp. were the index’s worst performers. Maguire, the biggest office landlord in downtown Los Angeles, lost 95 percent last year. SL Green, New York City’s largest office landlord, fell 72 percent.

“When’s the bottom going to be -- that’s the big question right now,” said Harbert.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net.

Last Updated: January 6, 2009 11:02 EST