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 DOWNTOWN MARKET – Q3 2025
DOWNTOWN RENTS HOLD STEADY AS AVAILABILITY DECLINES
In Downtown, the average rental price decreased slightly to $46.24 in Q3 2025 from $46.28 in Q2 2025, still
not recovering from its pre-pandemic level of $54.47. The availability rate has also been steadily decreasing,
reaching 15% in Q3 2025 from 16% in Q2 2025. However, this rate remains higher than the pre-COVID level
of 12.6%. 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.
YEARLY LEASING ACTIVITY IS PROJECTED TO BE HIGHER THAN PRE-COVID LEVEL
We are on track to experience the most successful year for leasing activity in Downtown since COVID. We are
projecting that leasing activity will be approximately 7 million square feet, which would be the highest since
2020, and above the pre-COVID level (6,611,417 square feet). This quarter’s leasing activity, though the lowest
this year at 1,057,886 square feet, still signifies a steady recovery for Downtown. However, leasing activity in
the third quarter was higher than in any quarter in 2024.
FLIGHT TO QUALITY DRIVES DOWNTOWN LEASING
In this Q3, there has been a flight to quality with Class A buildings still dominating the leasing activity. They
account for 82.2% (869,372 square feet) of leasing activity in the Downtown market. The largest deal in this
market was secured by The Bank of New York Mellon, which leased nearly 200,000 square feet of space from
Conde Nast, which has an office at One World Trade Center. This was the largest sublease transaction for
Q3.
THE FINANCIAL DISTRICT IS NOW THE TOP-PERFORMING SUBMARKET IN DOWNTOWN
This Q3 the Financial District leads the downtown submarkets with 56.8% (600,455 square feet). This could be
attributed to two of the largest deals being done in the Financial District submarket: BGC Brokers US, LLP
renewing at 55 Water Street, 129,271 square feet, and the New York City government relocating to 14 Wall
Street, 110,000 square feet. The World Trade Center had the second most leasing activity, which was 21.7%
(230,000 square feet), and in third place we had City Hall with 9.4% (99,541 square feet). This was the first
quarter that the Financial District dominated leasing activity instead of The World Trade Center market.
SUBLET MARKET HAS THE HIGHEST SUBLET RATE AMONG MARKETS
The Downtown sublet market had been slowly decreasing except for this quarter, which saw an increase to
22% from 21.3% in Q2 2025. The sublet rate before covid is 14.7%. Among all three markets, Downtown
continues to have the highest sublet rate. However, there is less square footage of sublet space in Q3 2025
versus Q3 2024.
CLASS A BUILDINGS DOMINATE DOWNTOWN’S BIGGEST TRANSACTIONS
In this third quarter, four out of five deals were direct deals, three out of five were relocations, four out of five
were expansions, five out of five deals were done in Class A buildings. Notably, two of the largest deals were
done in the Financial District which accounted for the highest leasing activity; the largest deal was done in
the World Trade Center.
STARTING RENTS AND NET EFFECTIVE RENTS
The Landlord Net Effective rate has decreased from $46.86 per square foot in Q3 2024 to $44.68 per square
foot in Q3 2025. This decrease can be attributed to the decrease in starting rents in Downtown New York.
Starting rents fell from $50.23 per square foot in Q3 2024 to $48.11 per square foot in Q3 2025.
The average lease term is 7 years, with tenants receiving $86.24 per square foot for tenant improvements and
6 months of free rent. For a ten-year lease, tenants can expect $122.00 per square foot in tenant improvementsand 8.5 months of free rent.
THE ROAD TO RECOVERY HAS BEGUN
The Downtown market is showing signs of recovery. Leasing activity is spreading through all three
markets, and Downtown is expected to exceed pre-COVID levels. The rentable square feet of sublet space
is decreasing. As it decreases Landlords will not compete with sublet space, the landlord will not need to
offer larger concession packages (i.e., free Rent and work)
