Prepared by Richard Plehn, Lisa Ann Pollakowski, Vanessa Ollarves, Steve Gardner
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SUMMARY OF THE COMMERCIAL OFFICE MIDTOWN MARKET – Q2 2026
LEASING ACTIVITY SIGNIFICANTLY DECLINED AND FELL BELOW PRE-COVID LEVELS
After increasing quarter-over-quarter for three consecutive quarters, Midtown leasing activity dropped from 8 million square feet in Q1 2026 to 6.2 million square feet in Q2 this year, just below pre-COVID levels of 6.3 million square feet. Nevertheless, that is in line with the Midtown five-year average of 6,246,901 per quarter.
The decrease in activity can likely be attributed to the limited availability of premium space in Midtown. As a result, tenants are relocating to Midtown South and Downtown, where they can find more suitable options. This shift underscores the importance of quality space influencing tenant decisions and shaping overall market dynamics.
Nevertheless, despite the quarter-over-quarter drop-off, Midtown experienced its strongest first half of the year since the pandemic with 14,269,034 square feet of activity. Illustrating Midtown’s post-pandemic recovery, the first six months of 2021 by comparison registered just 7,001,087 square feet of transactions.
CLASS A BUILDINGS CONTINUED TO LEAD LEASING ACTIVITY
In Q2, Class A buildings dominated leasing in Midtown, accounting for 77.7% (4.9 million square feet) of all activity. Class B buildings encompassed 18.4% (1.1 million square feet), and Class C recorded 3.9% (243,568 square feet
CLASS A BUILDINGS CONTINUED TO LEAD LEASING ACTIVITY
In Q2, Class A buildings dominated leasing in Midtown, accounting for 77.7% (4.9 million square feet) of all activity. Class B buildings encompassed 18.4% (1.1 million square feet), and Class C recorded 3.9% (243,568 square feet
AVERAGE ASKING RENTS SHOWED A SMALL INCREASE
In Q2 2026, average asking rents in Midtown increased to $49.98 per square foot from $49.20 in Q2 2026, a 1.59% increase. However, this was still far below pre-COVID levels of $59.71. For the past three quarters Midtown’s average asking rent has been below $50.00. It’s important to note however, that the data excludes many spaces where landlords have not listed an asking price, meaning the actual rate would very likely be higher if those asking rates were published.
Class A asking rents in Midtown averaged $70.25 in Q2, below last quarter’s $73.53. Class B asking rents averaged $47.65 per square foot, and Class C averaged $40.05. Both were up compared to the preceding quarter. Spaces available for lease in Class A buildings are mostly located on lower floors and are priced at half the rate of space on higher floors. As a result, average asking rents are declining due to comparative pricing within a building’s stack and not a falloff in demand.
Among the Midtown submarkets, the Plaza District recorded the highest average asking rent at $65.09, followed by Grand Central at $61.04. Times Square and Columbus Circle also exceeded $50.00 per square foot at $58.68 and $53.88, respectively.
AVAILABILITY RATE CONTINUED DECLINING
As of Q2 2026, Midtown’s availability rate has decreased for nine consecutive quarters to 12.7%, the lowest rate in the past five years. Despite this strong trend, the rate is 460 basis points (bps) above pre-COVID levels (8.1%). Office-to-residential conversions and landlords under financial pressure directly impact the availability rate however, suggesting it could possibly be as much as 1%-2% lower.
SUBMARKET AVAILABILITY RATES
In terms of submarket availability rates, the U.N. Plaza recorded the lowest rate with 8.5%, followed by the Penn Plaza/ Garment submarket with 11.20% and the Plaza District with 11.4%. At the opposite end, Murray Hill had the highest rate at 19.8% with Times Square next at 16%. The U.N. Plaza’s rate has now been below 9% for three consecutive quarters.
SUBLET RATE SLIGHTLY INCREASED BUT REMAINED LOW
In Q2 2026, the sublet rate as a percentage of total availability slightly increased to 15.0% from 14.7% in Q1 2026. This quarter marked the first time in the past two years that the sublet rate increased quarter-over-quarter. The rate is also well below pre-covid levels of 18.5%, marking the sixth consecutive quarter where that has been the case. The general pattern of decline can be attributed to landlords recapturing sublease space and combining it with direct space to lease larger blocks.
AVERAGE LEASE SIZE DECREASED BUT REMAINED ABOVE PRE-COVID LEVELS
In Q2 2026, average lease size fell nearly 25% quarter-over-quarter, dropping from 12,792 to 10,294 square feet. That placed the average below pre-covid levels of 9,635 square feet. Overall, average lease sizes are trending downward as companies adapt to a more flexible work environment. Driven by AI-related staffing uncertainty and the growing popularity of coworking solutions, many tenants are moving away from large, long-term office commitments in favor of smaller, more flexible spaces
LARGE BLOCKS OF SPACE REMAINED SCARCE
The shortage of blocks currently available to accommodate the largest occupiers continued in the second quarter. Only four buildings in the Midtown market can accommodate requirements of 500,000 square feet or more: 330 West 42nd Street, 535 West 46th Street, 1211 Avenue of the Americas, and 850 Third Avenue.
FIVE LARGEST DEALS COMPLETED
Four out of the five largest deals in Q2 were renewals, five out of five were direct deals, four out of five were expansions, and five out of five were completed in Class A buildings. Simpson Thacher & Bartlett signed a 916,000-square-foot lease at 570 Fifth Avenue in the Grand Central submarket, marking the largest Manhattan office lease of Q2 2026. The law firm is relocating and expanding from its long-time headquarters at 425 Lexington Avenue to Extell Development’s under construction trophy office tower, continuing the ongoing trend of tenants leasing space that hasn’t yet been built. With large blocks of trophy quality space in exceptionally short supply, this is a trend that should continue for the foreseeable future.
The second largest deal in Midtown was L’Oréal Groupe’s 484,000 square foot renewal at 10 Hudson Yards in the Penn Plaza/Garment District, followed by Versant Media’s 249,000 square foot renewal at 229 West 43rd Street and NBCUniversal’s 244,000 square foot renewal at 1221 Avenue of the Americas, both in the Times Square submarket.
