By Herbert Lash

NEW YORK (Reuters) - Office leasing activity in Manhattan remains strong but tell-tale signs - such as rising landlord concessions and companies that renew contracts rather than take new space - indicate a market in correction, realtor Cushman & Wakefield said Tuesday.

The commercial real estate market in the second quarter picked up after capital market turmoil in the first quarter curbed activity, with June's 2.9 million square feet of space marking the highest monthly volume of space leased in the past 12 months.

Yet the vacancy rate in Midtown was high at 9.2 percent, the sublease market was not active while asking prices for renting an office rose to $77.99 per square foot, exceeding the previous peak in September 2008 by 2 cents, Cushman & Wakefield said.

Manhattan's office market is a snapshot into the economic health of New York and indicates future business activity.

A record high ratio of contract renewals to the number of businesses that decided to relocate suggests few companies plan to expand, said Mark Weiss, executive vice chairman of brokerage at Cushman & Wakefield.

"When they renew they put a Band-Aid on things," Weiss said, adding that landlords should be concerned. "When they relocate for the most part historically, there's expansion involved. When they renew, it's either status quo or contraction."

The amount of so-called TI, or money landlords supply up front for tenants to improve or remodel offices, rose to an all-time high of more than $80 a square foot. That resulted in an effective rental rate that is off 10 percent in the first half of the year from the year-earlier period, Weiss said.

Considering it takes time to execute a lease once an agreement is reached, the effective rate is likely poised to fall further, he said.

"This fall is the result of activity that started well into the midpoint, the early point of 2015," Weiss said. "We think we'll see the next six months a reset on price and we think that reset will be even lower."

New York's commercial real estate market is still strong on a historical basis, as declines in activity are coming off the record back-to-back years of 2014 and 2015.

Data on building sales also indicates a correction. Dollar volume is off 18 percent so far this year, the number of properties sold is down 13 percent and the average price of property sold fell 6 percent. Land prices fell about 20 to 25 percent over three weeks at the end of September 2015.

"We believe that we're nine months into a reset within the investment sales market," said Bob Knakal, chairman of Cushman & Wakefield's New York investment sales unit. "Land is so indicative of sentiment in the marketplace because it really tells you what the developers think."

(Editing by Cynthia Osterman and Matthew Lewis)