Prepared by Richard Plehn, Lisa Ann Pollakowski, Vanessa Ollarves, Steve Gardner
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SUMMARY OF THE COMMERCIAL OFFICE MIDTOWN SOUTH MARKET – Q2 2026
LEASING ACTIVITY SLIGHTLY INCREASED AND IS ABOVE PRE-COVID LEVELS
Midtown South leasing activity in Q2 2026 totaled 3.08 million square feet, a small increase from the 3.03 million square feet recorded in Q1 2026. This was the second highest quarterly leasing total in the past five years and well above pre-COVID levels of 1.9 million square feet. It also handily exceeded the five-year average of 2,070,600 square feet. Tellingly, Q1 this year saw the third highest quarterly total in the same five-year period. For the past seven quarters, leasing activity has exceeded pre-COVID levels. In addition, sublease activity has increased for three consecutive quarters and Q2 saw nearly double the activity of Q3 2025. Q2’s total of 457,172 square feet was the highest quarterly amount since Q3 2021, and also the highest first half of the year.
CLASS B BUILDINGS CONTINUE TO LEAD LEASING ACTIVITY
Historically, Class B buildings comfortably lead leasing activity in Midtown South and Q2 was no exception. It should be understood however, that Class A buildings only represent 33% of the Midtown South inventory, whereas Class B comprises a full 50%. Nevertheless, as Class B totaled 55.9% (1,725,802 square feet) of all leasing activity it’s clear that in Midtown South that sector punches above its weight. Class A was next with 28.6% (882,933 square feet), and Class C followed with 15.41% (475,296 square feet). Class B leasing has been above pre-covid levels since Q4 2024 and has been increasing ever since.
CHELSEA LED ALL MIDTOWN SOUTH SUBMARKETS IN LEASING ACTIVITY
In Q2, Chelsea led all Midtown South submarkets with 33.9% (1,045,521 square feet) of leasing activity, closely followed by Gramercy Park at 26.06% (803,827 square feet). Hudson Square also recorded a strong quarter, with 25.98% (798,412 square feet) in total leasing.
ASKING RENTS INCREASED AS THE MARKET CONTINUED TO TIGHTEN
In Q2 2026, Midtown South asking rents increased quarter-over-quarter by $0.23 to $55.24. Despite a consistent upward trend over the past four quarters, current rents remain significantly below pre-COVID levels of $63.84. It is important to note however, that average asking rent numbers are below where they might otherwise be since most landlords don’t list an official asking rent for their buildings. For that reason, too, when looking at the average rents by class they do not seem to accurately reflect the overall average. As one example, a space at 200 Park Avenue South recently received an offer of $160 per square foot.
Class A asking rents in Midtown South averaged $94.20 in Q2, an increase from last quarter’s $78.22. Class B rents averaged $56.90 per square foot, and Class C averaged $48.58. Both were up compared to the preceding quarter.
SOHO RENTS CONTINUE TO LEAD ALL MIDTOWN SOUTH SUBMARKETS
Among the submarkets, SoHo led with an average of $72.31 per square foot, an increase from last quarter’s $70.63 per square foot. Gramercy Park ranked second at $58.98. Greenwich Village and Hudson Square also recorded average rents above $57.00 per square foot. In Soho, there are currently two buildings, 610 Broadway and 529 Broadway, with asking rents that exceed $200.00 per square foot.
THE AVAILABILITY RATE CONTINUES TO DECREASE
The availability rate in Midtown South has now dropped for ten consecutive quarters, hitting its
lowest figure for the past five years at 13.1% in Q2. This reflects a decline of 710 basis points
(bps) since Q1 2024 when the rate peaked at 20.2%. Further, availability in this quarter
represented a decline of 230 bps from the same period a year ago. Despite the continued
improvement, the availability rate remains well above the pre-COVID level of 9.1%.
MIDTOWN SOUTH SUBMARKET AVAILABILITY RATE
Among the submarkets, Gramercy Park recorded the lowest availability in Q2, with a rate of 10.0%, a
decrease from last quarter’s 11.1% and less than half the rate as recently as Q1 2024. Hudson
Square was next at 12.1%, followed by Greenwich Village at 12.3%.
MIDTOWN SOUTH HAS THE LOWEST SUBLET RATE IN THE MARKET
Over the past four quarters preceding Q2 2026, the amount of sublet space in Midtown South as a
percentage of all availability ranged from 10.6% to 11.1%. However, in Q2, the rate jumped to
13.7%, the highest figure since Q4 2024. Despite that, the rate is far below the pre-COVID level of
22.2% and the 23.4% recorded in Q3 2021. As a result, Midtown South continues to evidence the
lowest sublet rate among all three markets. TAMI (Technology, Advertising, Media and Information)
tenants typically drive most of the leasing activity in Midtown South. As these tenants frequently
seek space that is built out, furnished, and move-in ready, it may explain why Midtown South’s
sublet availability is usually the lowest.
AVERAGE LEASE SIZE DECREASED
In Q2 2026, the average Midtown South lease size was 9,206 square feet, a decrease from the 10,405
square feet posted in Q1 2026. It was, however, well above the pre-COVID level of 7,149 square
feet. The Q2 average was the third highest in the past five years and well above the five-year
average of 7,194 square feet.
FIVE LARGEST DEALS COMPLETED: TAMI COMPANIES KEEP DOMINATING
Three out of the five largest deals in the second quarter were recorded by TAMI companies.
Similarly, three out of the five were relocations, while four out of five were direct deals, and
three out of five were expansions. Additionally, four out of the five deals were done in Class B
buildings. The largest deal in the market was Google’s lease of 410,000 square feet at 315 Hudson
Street in the Hudson Square submarket, which accounted for four out of the five largest deals in
the quarter. This area, once a printing and manufacturing hub, is known for offering larger
floorplates compared to other submarkets, naturally lending itself to bigger transactions.
NET EFFECTIVE RENTS AND STARTING RENTS INCREASED
Landlord net effective rents rose from $73.43 in Q2 2025 to $77.29 in Q2 2026, an increase of more
than 5%. Starting rents also increased, rising from $78.50 a year ago to $82.34 in Q1 2026.
AVERAGE TERM INCREASED
The average lease term increased slightly, going from 73 months (6 years and 1 month) in Q2 2025 to
76 months (6 years and 4 months) in Q2 2026.
TOTAL CONCESSION PACKAGES AND TI ALLOWANCES ESCALATED
Total concession packages increased substantially, rising over 9% from $130.24 in Q2 2025 to
$142.21 in Q2 2026. The increase was fueled primarily by average tenant improvement allowances
jumping from $95.57 in Q2 2025 to $105.84 in Q2 2026. Tech tenants typically prefer leasing built
space and are willing to pay a premium for it.
FREE RENT
On average, tenants receive 7 Months Free Rent when the tenant signs a 6-year and 1-month (i.e., 73
Months) term lease.
MIDTOWN SOUTH KEEPS RECOVERING
Midtown south continued to be one of Manhattan’s strongest office markets in Q2 2026, supported by
steady tenant demand and limited space. The availability rate decreased, underlining the market’s
strength. Soho maintained its position with the highest asking rents, while leasing activity was
primarily driven by class B buildings. Looking ahead, Midtown South is on its way to a record year
of leasing, largely attributable to TAMI tenants
