Property & Portfolio Research, a Boston-based commercial real estate research firm, has released estimates of what the impact might be on the New York office market as a result of recent cataclysmic financial events, including the bankruptcy of Lehman Brothers.

Lehman Brothers employed more than 26,000 people globally -- about 10,000 were based in New York. The company occupies approximately 3.4 million sq. ft. of office space in the city, including Lehman’s 3.4 million sq. ft. headquarter building, 745 Seventh Avenue.

The addition of this space to the New York office market would likely result in negative net absorption of 11.4 million sq. ft. of space for the year, according to PPR. This would result in the vacancy rate rising to 12.8% in the third quarter, a 0.7% increase over PPR’s previous projections. This would also mean that rents would contract 4% in 2008 and 11% by the end of 2009, and only show positive gains in 2010.

Barclays’ pending acquisition of a portion of Lehman Brothers means that not all the Lehman space will be dumped back on the market. In a more optimistic scenario, if Lehman vacates only half of its office space, or 1.7 million sq. ft., vacancies would rise to 12.4% in the third quarter. In this case, the vacancy rate would be 2.2% above where it was a year ago, though projected rents would still be negative through 2009.

PPR also looks at a pessimistic scenario that takes into account likely job losses in other financial services firms, and the ripple effect on the market. If these effects are factored into the equation, a darker outcome emerges, in which job losses reach as high as 75,000.

Considering that the New York economy is linked to the financial services sector to a large extent, job losses on Wall Street would result in the metropolitan unemployment rate going up to 11%. If this worst case outcome materializes, negative net absorption of office space would result in a vacancy rate in the high teens, similar to levels seen in the early 1990s. And rent losses would continue through 2011.