Prepared by Richard Plehn, and Vanessa Ollarves.
Please click on the slideshow below for the full report. Alternatively, you can also follow the link on the button to read it on PDF.
SUMMARY OF THE COMMERCIAL OFFICE MIDTOWN SOUTH MARKET – Q3 2025
MIDTOWN SOUTH RENTS AND AVAILABILITY VERSUS PRE-COVID LEVELS
In Q3 2025, the average asking rent slightly increased to $52.41 from $52.19 in Q2 2025, maintaining a
stable trend since the start of the year, though remaining below the pre-COVID level of $63.84. The
availability rate in Midtown South has continued its downward trajectory since Q1 2024, reaching its lowest
point since 2021 at 15.6% this quarter, compared to 15.8% in Q2 2025. However, the availability rate at
15.6% Q3 is higher than the 5-year average Pre-COVID levels, 9.1%. It’s important to note, that as shown in
previous quarters, the availability rate could be lower due to office buildings being converted into residential
units and office buildings under financial stress.
MIDTOWN SOUTH HAS THE LOWEST SUBLET % TO TOTAL
AVAILABILITY
The Midtown South sublet market has been decreasing since Q3 2022, from 21.7% to 10.3% in Q3. Currently in Midtown South, there is 1,855,759 square feet of sublet space compared to the pre-COVID average 2,318,495 square feet.
LEASING ACTIVITY IS PROJECTED AT 10M SF, WHICH IS ABOVE THE 5-YEAR PRE-COVID AVERAGE
Last Year, leasing Activity was 7,796,455 square feet. This year, leasing activity so far is 7,449,968 square
feet. At this pace, leasing activity will be approximately 10,000,000 square feet. For context, the 5-year
pre-COVID average was 7,644,762 square feet.
CLASS B RECLAIMS TOP SPOT IN MIDTOWN SOUTH
Midtown South’s Class B buildings have typically experienced the highest level of leasing activity, except
for the previous quarter when Class A properties led with 60.8%. This quarter, things have returned to
normal, with Class B buildings accounting for 54.4% of the leasing activity and Class A buildings
representing only 24%.
THE AVERAGE LEASE SIZE DROPPED SINCE LAST QUARTER
In Q3 2025, the average lease size is 7,065 square feet, which is a big decrease from last quarter’s 10,470,
and below pre-Covid levels (7,149 square feet).
CHELSEA TOPS Q3 LEASING ACTIVITY
In the third quarter of 2025, Chelsea led leasing activity with 40.1% (819,691 square feet), followed by
Gramercy Park at 33.1% (676,190 square feet), and Soho in third place with 14.9% (305,238 square feet).
Greenwich Village, which recorded the highest activity in the previous quarter, accounted for only 3.8% this
quarter.
FIVE LARGEST DEALS COMPLETED
All five of the deals were direct and expansions, four out of five deals were relocations, and three out of five of
the biggest deals were done in class A buildings. The largest deal this quarter was done by Sigma Computing
for a 64,077 square feet relocation to 1 Madison Avenue in Gramercy Park. Additionally, WeWork leased
55,000 square feet at 245 Fifth Avenue, by committing to a long-term deal; WeWork believes the economy is
improving.
NET EFFECTIVE RENTS RISE AS CONCESSIONS EASE
The Landlord Net Effective rent increased from $64.44 per square foot in the Q3 2024 to $65.52 per square
foot in Q3 2025. This can be attributed to the increase in starting rents and the decrease in tenant improvements (TI) in Midtown South. The average lease is five years and two months, with tenant improvements valued at $87.62 per square foot and 5.4 months of free rent. Over a ten-year period, a tenant would receive $169.58 persquare foot in work and 10.4 months of free rent. Please note that this information is sourced from CompStak. I believe, however, that the tenant improvement package should be closer to $120.00 per square foot.
MIDTOWN SOUTH IS ON THE WAY TO RECOVERY
The Midtown South Market is recovering, with leasing Activity anticipated to be 30% better than the
pre-COVID 5-year Average. The tech industry is actively leasing space. Quality space (i.e., Architecturally
interesting, with Views, near Transportation) in a renovated building is harder to find today. As a result, we
expect concession packages to decrease and the term lengths to increase.
