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 MANHATTAN OFFICE MARKET- Q2 2025
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 DECREASING VERSUS ASKING RENTS DECREASING
In Q2 2025, the availability rate has continued to decrease over the past five quarters, from 17.9% in Q2 2024 to 15.1% this quarter. The asking rents have been increasing since Q2 2024, ranging between $50.21 and $50.33. However, in the Class A markets, rents continue to increase. The report does not take into account landlords who list their space with no rents.
BASE RENTS VS AVAILABILITY RATE IN THE MARKETS
In the second quarter of 2025, Midtown has the lowest availability rate out of the three markets, with 14.5%. Downtown has 16.2% and Midtown South has 15.9%. Midtown South has the highest base rent at $52.03, followed by Midtown at $51.90, and Downtown at $46.28. The report does not consider landlords who list their space with no rent. Most likely, Midtown would have a higher average than Midtown South and Downtown.
THE ACTUAL AVAILABILITY RATE COULD BE 10% TO 25% LOWER THAN THE AVAILABILITY RATE
It is important to note that the available rate may be lower for two primary reasons: approximately 12,782,164 square feet are currently unleasable because of landlord debt renegotiations, and an additional 22,917,123 square feet are possibly being converted into residential buildings.
THE PIPELINE RATE KEEPS DECLINING
The construction of new office buildings has been slowing in New York City from Q3 2021, with 17.3 million square feet being built, representing 27 buildings, to 5.6 million square feet, representing 14 buildings, in Q2 2025.
Boston Properties (BXP) is planning to develop a new office building without having any pre-leased space, counting on the strong demand for high-quality office buildings in that location.
TENANTS LOOKING FOR LARGER SPACES ARE GOING TO HAVE A HARDER TIME FINDING SPACE
There are limited options for tenants looking for space of 300,000 square feet. If tenants were looking to relocate their office for 300,000 square feet, there are 20 buildings can accommodate this requirement. If the tenant is looking for 600,000 square feet, there are only 12 buildings to accommodate their requirement.
LEASING ACTIVITY IS STILL BETTER THAN PRE-COVID LEVELS
In Q2 2025, the overall leasing activity decreased to 10,024,950 square feet from 11,447,334 square feet in Q1 2025. Even though it decreased, it is still higher than the average leasing activity before COVID, which is 9,963,875 square feet. Approximately 21,472,284 square feet have been leased in the first half of 2025, suggesting we are on track to lease 42 million square feet this year.
THE MIDTOWN MARKET LEASING ACTIVITY DECREASED AND MIDTOWN SOUTH INCREASED
In Q2 2025, 57.3% of leasing activity was completed in Midtown, whereas in Q2 2024, 71.1% was leased. This quarter saw 31.3% completion in Midtown South, compared to Q2 2020 it was only 16.7%. Leasing activity remained steady in Q2 2025 versus Q2 2024.
CLASS A OFFICE BUILDINGS DOMINATED THE LEASING
Leasing activity in class A buildings represented 75.2% in the overall market (7.5 million square feet), 19.4% in class B buildings (1.9 million square feet), and 5.5% in class C buildings (546,754 square feet). This quarter, dynamics shifted again in the Midtown South market, where class A buildings had the highest leasing activity with 61.79% and class B with 27.86%.
PENN PLAZA/GARMENT, PLAZA DISTRICT AND GREENWICH VILLAGE DOMINATED THE LEASING ACTIVITY
The Penn Plaza/Garment Market area led individual submarkets with 1,585,354 square feet leased, followed closely by Plaza District (1,434,167 square feet) and then Greenwich Village (1,136,271 square feet). Greenwich Village was the third most active market, primarily due to NYU’s lease of 1,067,383 square feet.
10 LARGEST DEALS
10 out of 10 top deals were done in class A buildings, nine out of 10 were direct deals, six out of 10 were relocations, and in nine out of the 10 deals the tenant leased more space.
The largest lease was 1,067,383 square feet by NYU at 770 Broadway. Followed by Deloitte, who leased 800,000 square feet at 770 Broadway.
STARTING RENTS AND NET EFFECTIVE RENT
Over the past three years, starting rents have consistently risen. In Q2 2025, the starting rents increased to $87.2, up from $85.3 in Q2 2024. Additionally, net effective rent has shown a steady upward trend, from $78.50 in Q2 2024 to $80.17 in Q2 2025. The TI value decreased in Q2 2025 to $99.63 from $101.01 in Q2 2024. The free rent also declined in Q2 2025 to 6.5 months from 6.8 in Q2 2024.
MANHATTAN IS RECOVERING
In summary, Midtown North is close to a full recovery. Midtown South is benefiting from tenants relocating from Midtown due to the unavailability of suitable space. Downtown is starting to recover as the sublet market shrinks. Large tenants requiring 300,000 square feet will have a harder time finding space because fewer than 39 office buildings can accommodate the requirement. Landlords will be able to negotiate better deals than 2 years ago for blocks of space larger than 300,000. Tenants seeking to lease Class A space will pay a premium due to the scarcity of available space. Rents will increase more rapidly in Class A space with great views.
