Market Report

Overview

With the fourth quarter of 2025 underway, New York's office market is arguably outperforming all other major U.S. office markets. With key leasing and availability milestones recently achieved, the New York office market is heading into its next phase of recovery. Manhattan's new leasing totals for the first nine months of 2025 have surpassed the same period in some years leading up to the pandemic. Nearly 27 million square feet was newly leased through the first three quarters of the year. The "flight to quality" trend remains the defining theme of New York's office market. Major tenants, particularly those in the financial sector, are doubling down on long-term commitments in the city's highest-caliber buildings. Of the top 10 new leases signed by square footage, all were located in buildings rated four or five stars. Trophy properties near major mass transit hubs in Midtown, particularly in the Plaza District and Grand Central submarkets, are performing best, with leasing volumes in these submarkets at or near pre-pandemic levels. On the supply side, available office space in Manhattan fell to 85 million square feet, with 2025 being the first year it has dipped below 90 million since late 2020. While strong leasing has contributed to the reduction, the removal of entire office buildings from the market for residential conversion and the considerable drop in new construction have also played a key role. Despite a slight increase in asking rents over the past year, the sheer amount of available office space continues to give tenants negotiating power. Market observers note that discounts of around 8% on average off asking rents are common, and many landlords remain reliant on substantial concession packages to close deals. That said, the size of those concession packages has largely stabilized over the past year, now that availability levels have notably declined. Positive net absorption over the past six quarters, combined with a lack of speculative new supply and an increase in office-to-residential conversions, suggests that the office market in New York should continue to outperform relative to the rest of the nation. The outlook risks are weighted slightly to the upside. According to Placer.ai, New York continues to lead the nation in the return to in-office work, which signals that office occupiers are more likely to expand rather than dispose of their existing space. Additionally, while recent U.S. trade policy has caused a sense of uncertainty surrounding the near-term national economic outlook, this uncertainty has yet to present itself in New York's office market, and the metro's robust demand drivers may outright extinguish any potential impacts.

Leasing

While much of the conversation about the U.S. office sector centers on "recovery," the reality for New York City is far more promising. Six consecutive quarters of positive absorption, continually declining availability levels, and improving leasing activity indicate a market that is steadily returning to pre-pandemic conditions. New leasing activity has remained strong in recent months, with approximately 8.5 million square feet leased during the third quarter, bringing the year-to-date leasing total to nearly 27 million square feet. At this pace, leasing activity is on pace to surpass 2019 totals. Leasing motivations are clearly driven by a mixture of tenants seeking quality and accessibility. Of the top 10 largest leases signed in Manhattan during the first half of the year, all were located in either 4 or 5 Star buildings. In fact, since early 2023, availability in New York's 5 Star trophy buildings has dropped from 19.1% to 12.1%, a 700-basis-point decline. Meanwhile, the U.S. overall has seen trophy availability decline by far less - from 21.3% to 20.2%, a change of 110 basis points, driven primarily by New York's performance. Tenants in the financial and legal sectors are driving the resurgence in leasing. They have returned to regular office use, continued to hire, and are actively relocating to trophy-quality properties in Midtown Manhattan. Major transit hubs like Penn Station and Grand Central connect employees from New Jersey, Connecticut, Long Island, and Westchester directly to the heart of the city, a key advantage other parts of New York City simply can't replicate. Several high-profile leases highlight this trend. Among law firms, Ropes & Gray signed for 390,000 square feet at 1285 Avenue of the Americas, while Covington & Burling leased 235,000 square feet at 30 Hudson Yards, a 5 Star building which was built in 2019. On the financial side, TPG Global leased 301,000 square feet at the recently built 66 Hudson Blvd., and Bloomberg committed to 175,000 square feet at 919 Third Avenue. That's not to say tenants are avoiding 3 Star office buildings. In fact, leasing activity in these commodity spaces has increased sufficiently that availability is finally starting to decline. Available space in Manhattan 3 Star office buildings hit a peak during the summer of 2024, with 33 million square feet being marketed for lease. Today, availability has declined by approximately 5 million square feet, with about 28 million square feet of space being marketed for lease. Additionally, approximately 3 million square feet of office space has been removed from the market as owners actively pursue residential conversions. Around 13 million square feet is currently under discussion for such conversions, making a reversal in availability trends increasingly unlikely. With little speculative supply in the pipeline and strong demand for high-quality space, tenants are eyeing what few desirable spaces remain while also making sure not to risk losing their current location. Landlords, in turn, are motivated to retain tenants and are offering attractive concessions to avoid backfilling large vacancies. This healthy deal-making environment ensures that office performance in New York will continue to outpace the rest of the U.S. in the near term.

Rent

New York office rents have declined by about 2% since the start of 2020 due to availability soaring over this span. Rents have inched upward over the past year, however, as fundamentals have stabilized. New York metro office rents average about $59/SF, rising to about $74/SF on average for properties located within Manhattan. While annual rent growth for all office properties in the metro is relatively muted, at 0.1%, trophy office buildings in New York are outperforming. This is because the availability rate across this segment has declined by more than 300 basis points over the past year. With spaces in quality buildings dwindling, tenants have shown little indication of sticker shock, as evidenced by a bevy of new leases in Midtown Manhattan buildings with triple-digit starting rents. At the highest end, asking rents at buildings in the recently built towers in Hudson Yards surpass $150/SF, while remaining space at One Vanderbilt is said to exceed $250/SF. The little change in nominal office rents over the past four years certainly does not reflect the more than 34 million SF of available office space currently available across the metro compared to the start of 2020. Rental growth would be worse, except landlords are typically hesitant to drop their asking rents, opting to offer discounts of up to 8% to the starting rent while also providing generous concession packages to secure long-term commitments instead. Market participants note that tenants are receiving up to 25% of their rent via concessions when signing sizable leases in 4 & 5 Star buildings. In some recently signed leases this year, sizable credit tenants have received up to 12 months of free rent and $140/SF in tenant improvement allowance on average when signing a long-term commitment. Considering how fast availability levels have declined in the past year, along with the fact that concessions are eating too much into income, it appears that concessions have peaked for now. Still, major owners, such as Vornado, have publicly commented on how much concessions impact their bottom line and how they are unlikely to go away until New York's availability rate more closely resembles its pre-pandemic average. With vacancy levels stabilized, rents are forecast to continue ticking upward. Robust tenant demand, dwindling availability, and a nonexistent speculative supply pipeline should boost rents throughout the metro regardless of building quality.

Construction

A dramatic slowdown in new office construction is underway in New York. Currently, about 6.7 million square feet remains under construction, a figure well below the 21 million SF underway at the beginning of 2020. Assuming standard planning and construction timelines, a large speculative office tower may not be built before 2029. Construction starts have failed to surpass 1.5 million square feet for 17 consecutive quarters, and less than 900,000 SF has begun construction throughout all of 2024. This marked the fewest annual construction starts in 30 years. Contributing to this slowdown is that lenders have grown more risk-averse regarding the office sector, with a lack of clarity about long-term tenant demand making it difficult for developers to secure construction financing. In some cases, active construction sites have hit the pause button. At 3 Hudson Boulevard, a 1.9 million SF tower in the Hudson Yards development, an anchor tenant has yet to be secured. In response, the developers, a joint venture between Boston Properties and the Moinian Group, paused construction on the office building in 2022, showing no plans to go vertical until a major commitment is secured. The developers are looking for third-party financing to replace an existing $80 million mortgage after the existing unpaid mortgage matured in August 2024. Annual deliveries stand at 3.7 million SF and these recent office completions have not significantly impacted vacancy levels, as these projects are non-speculative in nature. At 7 Hudson Square, Disney is the sole occupier of the 1.2 million SF building, which was delivered in late 2024. At 270 Park Ave., JPMorgan fully occupies the 2.5 million SF tower. Additionally, JPMorgan has not yet listed any of its current space for sublease or made any mention of other offices closing, which is a sign that the company plans to maintain its footprint at least in the near term. If anything, the slowdown in construction has helped relieve supply-side pressure at the higher-end spectrum of the market, as a relative sense of urgency is driving leasing activity. Tenants are competing for the dwindling amount of space left in 5 Star office buildings. The availability rate for 5 Star office buildings in Manhattan stood near 20% at the start of 2022, while today it sits closer to 10%. This decline in trophy office space has led to developers just starting to test the waters of speculative construction. At 70 Hudson Yards, Related Companies broke ground on a 1.1 million-square-foot tower in June 2025. Though a completion date around 2030 is anticipated and the foundation has yet to be poured, Deloitte has signed a lease agreement to anchor 800,000 square feet in the 5 Star office building. With the bulk of tenant demand concentrated in trophy office towers, older properties that require a significant renovation are now likely to sit vacant for quite some time, as these properties do not contain the modern amenities that occupiers covet. This reality has led to increased demolition activity as city officials indicated a desire to redevelop struggling office buildings into apartments, with conversions already taking place at 170 Water St and 4 New York Plaza. The Department of City Planning estimates that owners of about 60 office buildings have inquired about converting their properties to residential. Current estimations are that owners of about 13 million square feet of office buildings are actively discussing conversion opportunities.

Sales

New York's office investment market is witnessing better days as the second half of 2025 unfolds. Sales volume through the first three quarters of 2025 stands at $8 billion, a 27% increase compared to this time a year ago. Private and institutional capital account for much of the recent sales volume, with both groups appearing to take a longer-term view with their acquisitions. However, a difficult financing environment, coupled with the uncertainty surrounding the future performance of rent growth, is evident, considering this year's six-month total is far below the nearly $11 billion traded on average between 2015 and 2019. Pricing still lags pre-pandemic averages, and cap rates remain elevated despite the recent improvement in sales volume. Similar to leasing, both pricing and cap rates outperform based on a building's quality and location. Market participants note that cap rates for stabilized Class A assets are trading above 6.5%, with trophy buildings trading below that rate and lower-quality assets achieving a cap rate that is closer to double digits. Like occupiers, much of the focus from investors is on high-quality office buildings located in Midtown Manhattan. In November 2024, Mori Building Co. purchased an 11% ownership stake from SL Green Realty Corp. in 1 Vanderbilt. The 1.7-million-squarefoot trophy office building, which is located in Midtown's Grand Central Submarket, sold at a gross valuation of $4.7 billion (roughly $2,685 per square foot), yielding a net sale price of $517 million. The 5 Star building is 95% occupied by credit tenants, with the remaining tower level space commanding asking rents of more than $250/SF. Another example highlighting this trend is when Munich Re purchased a 75% stake in 320 Park Avenue in December 2024. The 4 Star office building is located in Midtown Manhattan's Plaza District and sold for a gross valuation of $675 million, translating to roughly $880 per square foot. The 35-story office building measures 766,000 square feet and was fully occupied at the time of sale. A capitalization rate of 4.75% was reported. Some buyers have zeroed in on vintage buildings that are struggling to retain tenants and are located in submarkets where demand remains notably weak, but whose existing structure could support a residential conversion. This was evident in the sale of 80 Pine St, a 50% occupied office building located in Lower Manhattan. In September 2024, Rudin Management Company sold the 1.1-million-square-foot office building as a conversion opportunity for a total of $160 million - translating to roughly $145 per square foot. The buyer was Bushburg Properties, which filed plans to create 500 residential units, with estimated costs of the project running $39.96 million, according to filings from the NYC Department of Buildings Distress continues to be a central theme, with office loans receiving credit downgrades, properties selling in foreclosure, and owners increasingly handing the keys back to their lenders, often citing the properties' inability to compete in today's new leasing environment. CMBS delinquency rates for New York office properties, which stood below 0.5% at the start of 2023, are now closer to 7% at the start of 25Q3. More than $30 billion in loans are set to mature over the next three years. How far values may fall will depend on the asset and its location. At 1740 Broadway, a 20% occupied 640,000 SF building near Columbus Circle, the decline in value was rather outsized. First, the building was appraised at $605 million in 2014. Then Blackstone defaulted on the $308 million mortgage in 2022, and the loan was sold for $180 million in April 2024, representing a 70% decline in value. Market participants note that the recent decline in the federal funds rate has boosted the appetite to transact. Additionally, positive absorption has been measured in six consecutive quarters, and investors are beginning to worry less about future rent growth prospects. The outlook aligns with current market sentiment, with pricing and cap rates holding in the near and medium term.

Economy

Despite ongoing post-pandemic adjustments, the New York metro area continues to hold advantages that few global cities can match. Home to more than 20 million residents, the region remains a magnet for world-class institutions such as Columbia University and New York University, alongside cultural icons like the Metropolitan Museum of Art and Broadway. Its role as headquarters to the United Nations underscores both its political and cultural reach. Recent census data highlights this renewed momentum. The metro population grew in both 2023 and 2024, with outmigration falling to its lowest level since 2013. New York City itself added 87,000 residents last year, reversing pandemic-era population losses and reinforcing the city's role as a hub for both immigration and domestic migration. A core strength of New York's economy lies in its scale and diversity. No single industry dominates, creating resilience against downturns. Finance and technology remain central, but the metro area also employs millions across healthcare, education, legal services, retail, hospitality, and the creative industries. This diversity, paired with growth in high-paying sectors, has allowed the city's office market to outperform all other U.S. metros over the past two years. Widely recognized as the nation's financial capital, New York hosts global institutions such as JPMorgan Chase, Goldman Sachs, Citigroup, and Morgan Stanley. The sector is a powerful driver that helps sustain a regional GDP above $2 trillion, the largest metropolitan economy in the world. Tech is another growing sector. Since 2010, giants like Google, Amazon, Meta, Microsoft, and Spotify have expanded significantly, while startups have secured the second-highest level of venture capital investment in the country. More recently, AI companies have been increasingly expanding in New York. Connectivity is another defining strength. The Port of New York and New Jersey ranks among the nation's largest, while JFK and Newark airports handle most international cargo. Penn Station and Grand Central expansions, along with the upcoming Gateway rail project and congestion pricing, are set to improve mobility for millions. Tourism continues to surge. More than 62 million visitors arrived in 2023 and 64 million in 2024. Combined with cultural diversity and job opportunities, this momentum keeps New York attractive to young professionals. Yet demand for housing far outpaces supply, making affordability a persistent challenge that threatens talent retention.