The Manhattan office market closed 2025 with strong momentum, recording its most active quarter since the end of 2019. Growing demand from technology companies, tightening availability, and rising rents all suggest that the market’s recovery is continuing as the city heads into 2026.
According to Lee & Associates NYC’s fourth-quarter report, tenants signed 11.6 million square feet of leases in Q4. As a result, total leasing activity for the year reached 42 million square feet, representing a 7% increase compared with 2024. At the same time, availability tightened for the seventh straight quarter to 13.9%, while net absorption remained positive at 3.7 million square feet.
“The office recovery is no longer theoretical—it’s measurable,” said Todd Korren, executive managing director and director of leasing at Lee & Associates NYC. He noted that tenants are once again committing to larger spaces, while key market fundamentals continue to strengthen across Manhattan.
Class B Buildings See Rising Demand
Although major Class A deals dominated the quarter, Class B buildings are becoming significant beneficiaries of the tightening market. Large transactions included Moody’s 461,567-square-foot lease at 200 Liberty Street and Bloomberg’s 435,355-square-foot renewal at 120 Park Avenue.
In Midtown, Class B availability dropped to 14.8%, which pushed rents to $55.65 per square foot. Quarterly leasing activity there surpassed 1 million square feet. Meanwhile, Midtown South recorded Class B rents of $63.05 per square foot as availability declined further. Across Manhattan, Class B asking rents climbed to a record $68.61 per square foot.
Korren explained that well-located Class B buildings are attracting renewed interest. As prime office supply becomes more limited and new construction slows, upgraded properties are increasingly appealing to tenants seeking quality space at competitive prices.
Tech and AI Companies Lead Leasing
Technology and artificial intelligence firms played a major role in driving leasing demand during the fourth quarter. Downtown leasing nearly doubled compared with the previous quarter, reaching 1.8 million square feet. Large deals were completed at One World Trade Center and One Madison Avenue.
Midtown South also saw strong demand from fintech and AI companies. Class A leasing there reached almost 633,000 square feet. Lee & Associates executives Justin Myers and Dennis Someck recently finalized a 6,000-square-foot lease for AI firm SceniX at 80 Eighth Avenue.
Myers noted that next-generation companies continue to prioritize office locations that provide access to talent and modern work environments. This trend is helping strengthen rental pricing while gradually reducing available space across several submarkets.
Supply Changes Tighten the Market
Structural changes in the city’s real estate landscape are also shaping the Manhattan office market. office -to-residential conversions, along with limited new development, are steadily reducing the total supply of available office space.
Midtown availability declined to 13.5%, its lowest level since 2020. Downtown availability dropped to 14.1%, while Midtown South recorded its sixth consecutive quarter of declining availability, reaching 15.0%.
According to Korren, these conversions permanently remove portions of office inventory. As a result, the remaining high-quality properties become more valuable, which supports rent growth and strengthens the market position of well-maintained buildings.
Rents Rise as Market Stabilizes
Average asking rents across Manhattan increased to $75.80 per square foot in the fourth quarter. Class A properties averaged $87.54 per square foot, reflecting continued demand for premium office locations.
Office visitation also improved toward the end of the year. By December, attendance levels reached about 81% of what they were in December 2019, suggesting that workers are gradually returning to office environments.
Woody King, senior managing director at Lee & Associates, said the consistent improvement across Midtown, Midtown South, and Downtown indicates a healthier market overall. As the Manhattan office market enters 2026, he added, the discussion is shifting from simple stabilization toward long-term positioning and growth.
