Tale of two markets: Building sales up, but leasing down.

What a contrast between the sales and leasing markets. Prime office buildings are going to market--and being sold. Meanwhile, leasing volume continues to ebb, though plenty of landlords still benefit from top of the market leases signed during the late 1990s.

One Manhattan sales broker even called it "the best sales market since 1987," as investors presumably transfer money from stocks into real estate.

"The flight cash going into real estate now is different from years past. These investors are willing to accept lower returns on this real estate," said Robert Knakal, chairman of Massey Knakal Realty Services. His company focuses on the sale of small to mid-sized properties, generally less than 150,000 SF.

Given the difficult leasing environment, the flurry of sales activity could be read as an exit strategy on behalf of frustrated owners. One sales broker begged to differ.

"These sales are not the result of frustration. Many owners are disposing of property at a profit right now," said Insignia/ESG executive managing director Ron Cohen, who added that real, estate is "more secure of an investment" these days.

Nearly 4.5 million SF of major Manhattan office space is on the market, according to Real Estate Alert. Two East Side buildings--685 and 825 Third Ave. --account for slightly more than one a quarter of this sum. 1177 Avenue of the Americas--estimated at $500 million--accounts for another quarter of this total. Lehman Brothers, which owns a 50% stake in 3 World Financial Center, is reportedly marketing 1.1 million SF of space here. American Express owns the other half of 3 WFC.

It's anticipated that Brookfield Financial Properties will buy the space from Lehman Brothers, said a commercial broker. In the event that Brookfield balks, Lehman Brothers is prepared to lease the space through Insignia/ESG.

"But everyone really thinks that Brookfield will buy this piece of the World Financial Center," said the broker.

Elsewhere in the city, 1515 Broadway is on the market for $480 million. 550 Madison Avenue is also on the market for $235 million. 660 Madison is reportedly on the market for $160 million.

"This is a Class A, fully leased building, sure to attract a lot of attention," said Woody Heller, the executive managing director of Insignia/ESG who is marketing the building. Barney's occupies the bottom of this building while the top is reserved for office space.

As long as there are few alternatives left for investors--and interest rates remain low--Heller believes that buyers--will continue to troll for Manhattan office properties.

Buyers aren't likely to see any returns on their brick-and-mortar investments for some time, said one commercial broker.

"This is a long term investment. Nobody is looking at the next five years. So leasing is still where the money is short-term," said David Levy, principal of Adams & Company.

For the landlords whose tenants signed leases in 2000, top of the market rents are still pouring into their war chests. But other landlords are facing imminent lease expirations on leases signed during the mid to late 1990s. For this group, said Levy, lowering rents as a way to retain or attract tenants isn't always an option.

"Some of these landlords are carrying so much debt that they cannot even think about lowering their rents," said Levy.

How well is the sales market expected to hold up over the next few months? Not so well, predicted Cohen.

"I really don't see more building sales in the near future," said Cohen, who feels that buyers are increasingly worried about "getting stuck with a building" in this economy.