Should Lehman Brothers decide to sell its New York headquarters, it would be bringing the tower to the market after Manhattan's office vacancy rate rose to the highest level since 2006 in the three months that ended July 31.

The tower, near Times Square at 745 Seventh Ave., may be worth more than $1 billion, making it among the company's most valuable assets. The 32-story skyscraper has about 1 million square feet of space. In 2001, when Lehman bought it from Morgan Stanley for about $700 million, the price of $650 per square foot was a record for Manhattan.

Now, "$1,000 a foot would be a conservative estimate," said Dan Fasulo, market research director for Real Capital Analytics Inc., a New York outfit that tracks commercial real estate pricing.

However, the building's value would be cut by about 20% if delivered to a new buyer vacant, Mr. Fasulo said. "You'd take a hit of maybe $200 a square foot," he said.

Lehman filed for protection Monday under Chapter 11 of the U.S. Bankruptcy Code.

The investment bank owns or leases more than 2.2 million square feet of space in midtown Manhattan, or 1.5% of the market's Class A inventory, according to a report issued Monday by Karine MacIndoe, an analyst at Bank of Montreal's BMO Capital Markets.

Vacancies jumped to 7.1% from 5.3% a year earlier, according to the New York commercial real estate brokerage Cushman & Wakefield Inc. Rents rose 21% from a year earlier and 6.6% from the previous three months, to $71.59 a square foot.

Sales of Manhattan commercial property declined 59% in the first half from the same period last year.

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