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: MIDTOWN SOUTH
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 FOR RENT VERSUS AVAILABILITY
In Midtown South, the average rental asking price decreased to $52.03 in Q2 2025 from $52.34 in Q1 2024. The availability rate has been steadily decreasing since Q1 2024 with 20.4% to 15.9% in Q2 2025. However, it is still higher than pre-COVID levels (9.1%).
THE ACTUAL AVAILABILITY RATE IS LIKELY 14% TO 14.8 % INSTEAD OF 15.9%
It is important to note that the available rate may be lower due to the buildings being converted into residential use. Midtown South is facing a decline in available office space due to two primary reasons: approximately 2,837,354 square feet are currently unleasable because of landlord debt renegotiations, and an additional 5,850,037 square feet are possibly being converted into residential buildings.
LEASING ACTIVITY DELIVERED RECORD-BREAKING LEASING VOLUMES
For the past year, leasing activity in Midtown South has been above pre-covid levels, from 2,236,689 square feet in Q3 2024 to 3,146,924 square feet in Q2 2025. This quarter’s leasing activity is 1,235,734 square feet above pre-covid levels. This irregularity could be attributed to the 1,067,383 square feet that NYU leased at 770 Broadway. Before COVID, yearly leasing activity was 7,644,762 square feet, for the past 2 quarters, leasing activity has been 5,455,308 square feet.
GREENWICH VILLAGE IS THE HIGHEST LEASING ACTIVITY SUBMARKET
In Q2 2025, Greenwich Village dominated leasing activity in Midtown South with 1,136,271 square feet (31.7%). Leasing activity was the highest in Greenwich Village because NYU did 93% of all leasing activity in the Greenwich Village market.
CLASS A OFFICE BUILDINGS OUTPERFORMS CLASS B IN LEASING ACTIVITY
This quarter in Midtown South, the Class A buildings leasing activity was 1,944,572 square feet. Class A leasing activity accounted for 61.8% of all leasing in Midtown South. Class B buildings leasing activity was 876,631 square feet, accounting for 27.8 % of all leasing in Midtown South. Usually, Class B buildings dominate leasing activity in Midtown South; however, for the past two quarters, that hasn’t been the case. Tenants from Midtown have been moving to Midtown South because they cannot find the space they’re looking for, for example, Goodwin Procter leased space at 200 Fifth Avenue (Gramercy Park). Law firms traditionally lease space in Midtown or Downtown.
MIDTOWN SOUTH SUBLET MARKET IN AGGREGATE AVAILABILITY (I.E., SQUARE FOOTAGE) LOWER THAN PRE-COVID LEVELS
In Q2 2025, there is approximately 1,973,062 square feet (11.3%) of sublet space in Midtown South. The average pre-COVID level was 2,193,768 square feet (22.2%). If the sublet market continues to decrease, tenants will start to lease second generation and pre-built space instead.
5 LARGEST DEALS COMPLETED
Five out of five deals were relocations, expansions, and were done in class A buildings. The largest deal in this quarter was completed by NYU at 770 Broadway in the Greenwich Village submarket, spanning 1,067,383 square feet. The NYU lease is a synthetic lease, which means that NYU will not be responsible for paying Real Estate Taxes. Three out of the five largest deals involved companies that were founded within the past fifteen years (Fanatics, Pinterest, and Chime Financial).
STARTING RENTS AND NET EFFECTIVE RENT
In the Midtown South submarket, starting rents keep increasing year over year, from $92.07 in Q2 2024 to $97.23 in Q2 2025, net effective rent also increases from $87.68 in Q2 2024 to $93.11 in Q2 2025.
OUTLOOK FOR MIDTOWN SOUTH
The Midtown South Market is expected to continue recovering if the economy avoids a recession. If the sublet market in total square feet decreases, then direct space will be leased. Landlords will not need to offer as large of concession package because they will not be competing with built sublet space. Landlord net effective will increase.
