Prepared by Richard Plehn, Lisa Ann Pollakowski 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 MARKET- Q2 2025: DOWNTOWN
NEW YORK CITY ECONOMY FAIRS BETTER THAN THE REST OF THE COUNTRY
The current economic outlook is characterized by significant uncertainty due to factors such as tariffs and advancements in artificial intelligence. As a result, job growth in the United States went down to 0.9%, a decrease from 1.3% in June 2024. However, the monthly civilian labor force has expanded from 168 million to 170 million, with 1.15 million more citizens employed compared to the previous year. Additionally, the U.S. 10-year treasury yield has decreased from 4.43% in June 2024 to 4.24% in June 2025.
In contrast, New York City’s fared better than the rest of the United States. Job growth in NYC remains stable at 1.4%, and the monthly civilian labor force has grown to 4.17 million, up from 4.15 million the previous year. Furthermore, the unemployment rate in New York City has decreased from 4.3% in June 2024 to 4.0% in June 2025.
ASKING RENT VERSUS AVAILABILITY
In downtown, the average rental asking price increased to $46.28 in Q2 2025 from $45.98 in Q2 2024, even though it increased, it is still very low since pre-pandemic levels of $54.47. The availability rate has been steadily decreasing since Q2 2023 from 19.5% to 16.2% the lowest since Q2 2021 (16.8%), however, it is still higher than pre-Covid levels (12.6%).
THE ACTUAL AVAILABILITY RATE IS LIKELY 10% TO 12 % BELOW THE STATED RATE
It is important to note that the available rate could be lower because of the buildings that are being converted into residential. Downtown is facing a decline in available office space due to two primary reasons: approximately 3,736,695 square feet are currently unleasable because of landlord debt renegotiations, and an additional 10,965,497 square feet are possibly being converted into residential buildings.
LEASING ACTIVITY DROPPED BY 46% FROM Q1 TO Q2
The leasing activity in Q2 2025 was 1,146,284 square feet, which is a big fall from the 2,135,498 square feet in Q1 2025. It is important to know that in Q1 2025 the Jane Street capital’s 983,000 square feet deal really upped the leasing activity number.
84.1% OF ALL LEASING ACTIVITY WAS COMPLETED IN CLASS A
In Q2 2025, Class A buildings in Downtown Manhattan accounted for 84.1% of all leasing with 964,000 square feet, about 30% below the 1,384,563 million square feet pre-Covid average. Class B space saw 153,000 square feet leased (13.3%), pre-pandemic average was 233,000 square feet.
THE WORLD TRADE CENTER REMAINS THE TOP‐PERFORMING SUBMARKET IN DOWNTOWN
The World Trade Center continues leading other Downtown submarkets in leasing activity, with 28.7% representing 546,393 square feet, this could be attributed to close transportation and the amount of Class A buildings in the market, followed closely by the Insurance District with 28.5% (541,719 square feet), and in third place is the Financial District with 23.4% (444,231 square feet). Unlike last quarter Q1 2025 in which WTC significantly outperformed other submarkets, this quarter leasing activity across Downtown’s top areas was much closer.
SUBLET MARKET INVENTORY IS SHRINKING
The Downtown sublet market has been declining for the last two quarters, since Q4 2024 from 27.22% to 20.99% in Q2 2025. The sublet rate before covid is 14.7%, for the last five years, sublet market has been above average. Out of all three market, Downtown has the highest sublet rate.
5 LARGEST DEALS COMPLETED
In the second quarter of 2025, four out of five were relocations, all four relocations were expansions. Invesco, who completed the largest lease in downtown, renewed at 225 Liberty Street for 204,000 rsf. Bank of New York, which is the second largest deal, relocated to 1 World Trade Center.
STARTING RENTS, NET EFFECTIVE RENT, AND TERM INCREASED IN Q2 2024
The starting rents in Q2 2025 show a slight increase to $51.92 from $50.52 in Q2 2024, the net effective rent also increased from $46.91 in Q2 2024 to $48.08 in Q2 2025. The average leased signed in Q2 2025 was 92 months versus Q2 2024 when it was 86 Months.
DOWNTOWN MARKET IS STARTING TO RECOVER
The downtown market is recovering because Landlords are converting buildings to residential. The sublet market is decreasing, as a result, landlords will not need to compete with sublets. Net Effective Rents will continue to increase.
