The office leasing market in Manhattan closed 2025 with strong performance, recording its highest quarterly activity since 2019. The surge was driven by increased demand from technology companies, shrinking supply, and rising rents. The market is showing a notable recovery as 2026 approaches.
Total leased space reached 11.6 million square feet during the final quarter of the year, bringing the annual leasing volume to 42 million square feet—an increase of 7% compared to 2024. The availability rate fell to 13.9% for the seventh consecutive quarter, accompanied by positive net absorption of 3.7 million square feet.
Class B properties outperformed as supply tightened and demand increased. In Midtown, the availability rate for this category dropped to 14.8%, while the average price per square foot rose to $55.65. Meanwhile, Midtown South recorded an average rent of $63.05 per square foot. Overall, Class B rents reached record levels with an average of $68.61.
Technology and artificial intelligence companies led the leasing momentum, with leased space in Downtown doubling to 1.8 million square feet. Demand also increased in Midtown South from fintech and AI firms.
Supply experienced significant changes due to office-to-residential conversions and a limited number of new developments, reducing availability rates in Midtown and Downtown to 13.5% and 14.1%, respectively.
Average asking rents in Manhattan rose to $75.80 per square foot, while Class A properties recorded an average of $87.54. Woody King of Lee & Associates noted that the market has become more balanced, paving the way for further improvement during 2026.
