Prepared by Richard Plehn, Lisa Ann Pollakowski and Vanessa Ollarves.
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SUMMARY OF THE COMMERCIAL OFFICE MARKET- Q2 2025: MIDTOWN
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.
AVAILABILITY INCREASING VERSUS ASKING RENTS DECREASING
In Q2 2025, the availability rate keeps decreasing for the past four quarters since Q2 2024 from 17% to 14.5% this quarter. The Asking Rents has been steadily increasing since Q3 2024, from $50.40 to $51.90.
LEASING ACTIVITY
Leasing activity decreased for the second quarter of 2025 to 5,770,221 square feet from 7,003,452 square feet in Q1 2025, this quarter leasing activity was below pre-Covid levels (6,399,825 square feet). This decrease can be attributed to class A tenants moving to Midtown South or Downtown, because they are having a hard time finding class A space in Midtown (i.e., Goodwin Procter and Pinterest).
LEASING ACTIVITY DOMINATED BY CLASS A BUILDINGS
Leasing activity in Midtown continues to be dominated by class A buildings in this quarter with 80.6% representing 4.6 million square feet which is a decrease from last quarter’s 5 million square feet. In this quarter the class A Building leasing activity was below pre-Covid levels (4.8 million square feet). This can be attributed to the lack of premium Class A spaces with great views.
GRAND CENTRAL AND PLAZA DISTRICT HIGHEST RENTS AND LOWEST AVAILABILITY RATE
Grand Central and Plaza District have the highest rents in the Midtown market with $65.17 and $61.25, respectively. Grand Central and the Plaza District have the lowest availability rate at 12.80 % and 13%.
TOTAL SQUARE FOOTAGE OF SUBLET SPACE IS GREATER THAN PRECOVID LEVEL
The Sublet market in Midtown has been steadily decreasing since Q2 2024 from 19.4% to 17.9% in Q2 2025, this quarter it is below pre-Covid levels (18.5%). However, there is more sublet space on the market today (8,949,822 square feet) versus pre-covid levels (5,167,139 square feet)
MIDTOWN AVERAGE LEASE SIZE
This quarter the average lease size slightly decreased to 9,398 square feet from 10,484 square feet in Q1 2025, this is the first time in the last 4 quarters that it has been below pre-Covid levels (9,635 square feet).
PENN PLAZA/GARMENT DOMINATED LEASING ACTIVITY
Penn Plaza/garment dominated Leasing activity in Midtown with 27.47% (1,585,345 square feet), closely followed by Plaza District with 24.85% (1,434,176), and on the third place is Grand Central with 15.51% (895,183 square feet). The largest deal in the Midtown submarket was done in the Penn Plaza/Garment submarket by Deloitte in 70 Hudson Yards with 800,000 square feet, and the second largest deal was Amazon leasing space at 452 Fifth Avenue.
5 LARGEST DEALS COMPLETED WERE EXPANSIONS
Three out of five deals were relocation, five out of five were expansions, and five out of five were done in class A buildings. The largest deal in the Midtown submarket was done in the Penn Plaza/Garment submarket by Deloitte in 70 Hudson Yards with 800,000 square feet. Followed by the United Nation Association renewed and expanded for 425,190 square feet at 2 UN Plaza. Amazon leased 330,000 square feet. Despite fears that Amazon’s setback in 2016, when politicians nixed its hopes for a major campus in Queens, would scare it out of the city, Bezos has expanded here relentlessly.* New York Post.
STARTING RENTS AND NET EFFECTIVE RENT
In the Midtown submarket, starting rents keep increasing. In Q2 2025, the starting rents increased to $91.67 from $90.07 in Q2 2024. The net effective rent has also increased from $83.85 in Q2 2024 to $86.33 in Q2 2025.
SUMMARY
If the USA does not fall into a recession, Tenants will continue to have a difficult time finding premier spaces in Class A office buildings. Asking rents will increase more rapidly, and the landlord concession package will decrease.
