New York City’s commercial real estate market gained momentum for the fifth consecutive quarter, thanks to improving job trends, according to a new study.

The Trammell Crow Co. report, which will be officially released later this week, showed the city’s vacancy rate slipped to 12.6% at the end of the third quarter from 12.8% in the second quarter and 14% a year earlier.

Sublease space is also on the decline. Its vacancy rate ticked down to 3.7% from 3.8% in the second quarter and 4.7% a year ago, the report said.

Asking rents, however, remained flat with the second quarter at $40.94 a square foot, which is down from $41.49 a year ago.

The report attributed rising employment for the positive trends in the quarter. The unemployment rate was 6.7% in August 2004, down from 7.6% in July, the report noted.

The report said financial services companies led the way when it came to leasing activity in the quarter. This sector signed leases for 3.59 million square feet of space in the past four quarters – more than five times the amount of space it leased during the previous 12-month period, the report said.

In the quarter, Midtown Manhattan drove much of the improvement. Its vacancy rate dropped to 11.4% from 12.2% in the second quarter and 13.4% a year ago. At the same time, asking rents climbed to $48.45 a foot from $48.17 in the second quarter and $46.43 a year ago.

However, it was a different story in downtown NYC. The downtown vacancy rate rose to 15.6% from 15.08% in the second quarter – although that’s still better than the 16% recorded a year ago. Asking rents rose slightly to $30.76 a foot from $30.71 in the second quarter – but that’s still short of year ago levels of $33.68 a foot.

Although employment trends have been improving, the report cautioned that “uncertainty about industry fundamentals like job growth and confidence” remain, and this could potentially curtail further market improvements.