Has the nation’s largest office market finally bottomed out?

It may be too early to call, but fresh research from real estate services firm FirstService Williams indicates that Manhattan office fundamentals may have stabilized during the third quarter.

Several key findings from the report back such a theory. Monthly leasing activity has nearly doubled since the end of May, for example, and this added leasing momentum held the overall availability rate, a measurement of vacancy, in check at 13.4% between the end of the second and third quarters.

On the economic front, the city has benefitted from a buoyant stock market rally in recent weeks plus an increase in New York City payroll employment. These positive economic indicators may be stoking business confidence, which in turn drives leasing demand on behalf of tenants.

To be sure, business confidence can waver unexpectedly at any moment. While it is difficult to predict just how fast the office market will rebound going forward, especially with respect to rental rates, this would mark a far quicker recovery compared with the end of the last recession when Manhattan’s office availability rate continued to rise for another 18 months.

“If the national and city’s recessions both ended around the middle of 2009, this stabilization of the availability rate so soon would be remarkable, especially relative to what happened during the last down cycle in the economy, which occurred in 2001,” said Mark Jaccom, CEO of FirstService Williams, in a prepared statement.

Even though the overall availability rate was flat, asking rents again fell 8.5% during the quarter. Rents have taken a major hit, too: Since peaking at midyear 2008, the overall average asking rent for Manhattan fell by a whopping 32.6% through the end of September, according to Robert L. Freedman, Executive Chairman of FirstService Williams.

Added Freedman: “In both the Midtown North and Midtown South markets, the average asking rent fell around 10% during the third quarter. In the Downtown market, the decline was a bit over 7% for the quarter.”

Additional highlights from FirstService Williams’ third quarter analysis:

Roughly a dozen transactions consisting of more than 50,000 sq. ft. closed each month during the third quarter

Monthly leasing volume posted its highest volume of the year during July and August, approaching Manhattan’s historical monthly average of 2.5 million sq. ft. per month.

The Midtown South availability rate dropped to 11.1% from 11.4%. In the Midtown North submarket, availability increased to 14.9% from 14.8% during the third quarter and the downtown market saw availability rise to 11.6% from 11.4%.

The overall average taking rent for Manhattan is down by 40% since the second quarter of 2008 and the declines were even larger in some of the more upscale districts.

Manhattan office sales volume recovered slightly as total volume for the first nine months of 2009 rose to $1.7 billion with six transactions completed.

Two transactions closed in the third-quarter of 2009: Worldwide Plaza at 825 Eighth Avenue sold for approximately $605 million, or $356 per sq. ft., and the AIG headquarters buildings, at 70 Pine Street and 72 Wall Street, traded for $150 million or $107 per sq. ft.