Manhattan Office Leasing Shows Impressive Uptick Amid 2025 Forecast

Office space leasing in Manhattan jumped by more than 20% in August when compared to the previous month, reaching 3.7 million square feet. This impressive figure surpassed the month’s average over the past decade, set at 2.72 million square feet, according to Colliers' latest report. Should this demand sustain throughout 2025, the annual leasing volume for Manhattan could exceed 40 million square feet, a milestone not reached since 2019.

Over the past 25 years, annual office space leasing in Manhattan traditionally ranged from 32 to 33 million square feet. In 2024, the borough managed to align with this average for the first time since the onset of the COVID-19 pandemic in 2020.

Franklin Wallach, who heads research and business development at Colliers, remarked on the robust demand, citing a return to physical office spaces and low levels of unemployment as contributing factors. He also noted a resurgence in certain industries, particularly the tech sector, which had been relatively quiet during the pandemic years.

For instance, Amazon accounted for over a million square feet of office leases in Manhattan just since November 2024. This activity included various leases, subleases, and collaborative agreements with coworking entities like WeWork, along with property purchases.

Spotlight on Key Market Contributors

The legal industry also shone brightly, with a record-breaking year for law firm lease agreements in 2023, registering over 4 million square feet. Though slightly lower last year, these figures still surpassed those of 2019.

Wallach highlighted a tendency towards high-quality new structures. Modern developments like One Vanderbilt, Hudson Yards, and Manhattan West have reported diminishing availability, reflecting a strong preference for these prime locations.

Consequently, the availability rate for new office spaces has decreased to 6.7%, while older, pre-war properties stand at 17%. Manhattan's overall availability dropped to 15%, marking its lowest since January 2021, sustaining a trend of either stable or reduced rates for 18 months.

Across Manhattan's various office sectors, availability rates for Midtown and Midtown South have seen a reduction, while Downtown remained steady during August.

Rental Trends and Market Adjustments

The average asking rent for office space in Manhattan was $74.73 per square foot by the end of August, reflecting a 1% increase from July. However, this is still 6% lower than rental rates recorded in March 2020.

Wallach observed that a 1% rise within a single month signifies a significant shift. This change is partly due to high-priced spaces entering the market, alongside landlords adjusting asking prices upwards.

Office conversions are significantly influencing supply and pricing dynamics. Colliers has documented nearly 9 million square feet of office space withdrawn from Manhattan's market over four years. This trend affects not just the supply chain, but also demand and pricing.

Wallach pointed out that for every million square feet designated for conversion, approximately 270,000 square feet of leasing occurs as tenants vacate and relocate, impacting the rental landscape.

Converted buildings often featured below-average pricing, including subleases, which lowered costs further. Their removal has consequently lifted the overall market price averages in Manhattan.