Manhattan Q4 office leasing was strongest in 6 years

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Office leasing in Manhattan increased significantly in the fourth quarter of 2025, driven by the continued return to the office and increased technology hiring, particularly in artificial intelligence.

Leasing increased more than 25% from the third quarter to 11.87 million square feet, according to Colliers. Demand increased 16% year over year; It was almost 52% above the five-year quarterly average and 43.5% above the 10-year average.

This was the island’s strongest rental quarter since the fourth quarter of 2019, Colliers found. Full-year 2025 rental volume was the highest since 2019 and just 2.4% below 2019’s pre-pandemic total.

“Manhattan’s strong performance in 2025 did not come out of nowhere, but was a continuation of the recovery we began to feel in 2024,” said Frank Wallach, managing director of research and business development for Colliers in New York.

“Demand in 2025 was a continuation of this trend, but has accelerated greatly due to factors such as tenants’ flight to quality to attract and retain talent, implementation of the back-to-office trend, major expansions by major tenants such as Amazon, NYU, and BlackRock, and the emerging AI industry rental space in Manhattan,” he said.

Wallach also noted an increase in demand from a variety of sectors, including finance, technology, law, education, medical nonprofits and government.

The available supply of office space is still much higher than at the start of the pandemic in March 2020, up around 37%, but much lower than the post-pandemic peak in February 2024, according to Colliers. Oversupply is slowly being absorbed as demand increases, and Manhattan now has the tightest supply since November 2020.

The shrinking supply eventually helps rents rise. Colliers found that Manhattan’s average asking rent was 1.5% higher in Q4 than the previous quarter, at $76 per square foot, Manhattan’s highest average since October 2020. The average asking rent for the top tier, called Class A product, which is newer construction, rose 1.6% to $83 per square foot, Colliers said.

Class B office product is older but tends to be in good locations. It now appears that homeowners are investing in improvements and renovations as demand increases. This helped rents rise 1.1% in Q4 to a record high of $68.61 per square foot, according to Colliers.

A flight towards quality continues, with 69% of all leased space in four- and five-star buildings, according to a separate report from CoStar; this rate was 66% in 2024. It was revealed that each of the 15 largest office leases signed during the year were at four- or five-star properties. For example, Deloitte’s 800,000-square-foot commitment at 70 Hudson Yards, Manhattan’s premier office building, was the largest lease of the year.

Quarterly net absorption, a measure of how much physical space tenants actually occupy and how much space they give up, was positive overall at close to 4 million square feet, according to the Colliers report. For the full year 2025, this figure was positive by 15.56 million square meters; This includes 2.14 million square feet of space taken off the market for conversion to planned non-office use.

“Critically, the recovery and strong demand in 2025 was also supported by the conversion of millions of square feet of buildings to non-office use, spurring a leasing wave of tenants moving out of those buildings,” Wallach said.

Despite the improvement in the market, there is still a much greater excess supply of offices than before the pandemic.

“Despite rising tenant demand and shrinking availability in 2025, the Manhattan office market has reduced only half of its current post-pandemic oversupply. The healthy demand recorded in 2025 and the conversion of underutilized office assets should therefore continue in 2026 and 2027,” Wallach said. he said.