How intense is the flight to quality for office space in Midtown Manhattan?<\/p>\n
Let\u2019s ask David Falk, president of the New York tri-state region for Newmark<\/a>. \u201cThe top 50 buildings in Midtown have a less than 3.7 percent availability rate.\u201d<\/p>\n SEE ALSO: Trump\u2019s Environmental Changes and CRE Climate Tech: What to Know<\/a><\/p>\n Before COVID, that number was over 12 percent.<\/p>\n As companies seek out the most comfortable, most amenitized and most productivity-optimized office spaces \u2014 that are also close to mass transit \u2014\u00a0 the Midtown office sphere has become a microcosm of the division between the best-of-the-best and the best-of-the-rest, given how little available space there is in trophy properties across the market.\u00a0<\/p>\n In Newmark\u2019s Manhattan office report<\/a> for the fourth quarter of 2025, the company noted that \u201cavailable space within the trophy set has not registered a quarterly rise\u201d since the first quarter of 2023.<\/p>\n Peter Johnson, a senior director at Avison Young<\/a>, notes how the lack of trophy availability is so stark that, for some, it has altered the basic nature of tenant preferences.\u00a0<\/p>\n \u201cObviously, we\u2019ve had the best year in nearly a decade, with financial and legal services always being the drivers for Midtown,\u201d said Johnson. \u201cThe vacancy and absorption rates say it all. With this huge flight to quality, tenants are not necessarily preferring location. They prefer quality, because everything\u2019s been gobbled up.\u201d<\/p>\n According to a report from CBRE<\/a>, leasing activity for Midtown reached 19.47 million square feet in 2025, a 16 percent increase from the year prior, the highest total since 2018, and among \u201cthe strongest [years] on record.\u201d Net absorption for Midtown hit 7.88 million square feet, its \u201chighest mark in nearly 30 years,\u201d and the availability rate declined to 13.4 percent, \u201cmoving closer to the pre-pandemic level of 11.8 percent.\u201d\u00a0<\/p>\n The average asking rent in Midtown, meanwhile, reached $84.24 per square foot, up 3 percent from the fourth quarter of 2024.\u00a0\u00a0<\/p>\n \u201cAsking rents posted modest growth, driven by limited availability in high-priced assets, but were held back by a lingering supply of challenged space,\u201d read the report. \u201cWhile Midtown\u2019s overall asking rent saw only slight quarterly and annual gains, top-tier assets with strong leasing momentum recorded more pronounced annual increases.\u201d<\/p>\n Office buildings in the most desirable Midtown submarkets, particularly Penn Plaza and the Plaza District, flourished more than others under this bifurcated rent regime. (Hudson Yards is part of the Penn Plaza area.)<\/p>\n According to a fourth-quarter 2025 report from Transwestern<\/a>, Penn Plaza and the Plaza District had availability rates of 9.9 percent and 10.4 percent for the quarter, respectively. By comparison, Midtown\u2019s East Side submarket availability rate was 16.1 percent, Times Square\u2019s was at 14 percent, and Grand Central\u2019s sat at 13.7.<\/p>\n The differences in Class A average asking rents was equally stark. Penn Plaza and the Plaza District clearly led the market, averaging $90.52 and $92.01 per square foot, respectively. Columbus Circle\u2019s average rent was $67.88, the East Side\u2019s was $75.21, and Grand Central\u2019s was $76.52.\u00a0\u00a0\u00a0<\/p>\n The Penn Plaza area in particular also had a strong year for positive absorption, with more than 3.44 million square feet taken as it came on the market, according to Transwestern<\/a>.\u00a0<\/p>\n Evidence of Midtown\u2019s solid overall performance coming into 2026 comes in several forms, with another being how the market as a whole is faring compared to before the pandemic.<\/p>\n \u201cMidtown Class A office rents are about 6 percent higher than pre-pandemic,\u201d said Michael Morris, president of the data center practice for the occupier advisory firm Cresa. \u201cA significant portion of square footage in Midtown consists of Class A trophy product. There\u2019s absolutely been a gravitas to the newer product.\u201d<\/p>\n This was also reflected in the number and size of significant leases signed throughout the market\u2019s office properties last year.\u00a0<\/p>\n \u201cMost of the big leases, 100,000 square feet and over, were in Midtown,\u201d said Corrie Slewett, research manager for the New York market for Transwestern. \u201cThere were a lot of renewals and expansions by long-term occupiers taking on more space or moving into newer and bigger space. We saw a lot of that, which is definitely a sign of confidence in the market.\u201d\u00a0<\/p>\n Examples of this include Deloitte relocating<\/a> from 30 Rockefeller Plaza to 800,000 square feet at the in-development 1.1 million-square-foot, 60-story 70 Hudson Yards; Citadel<\/a> taking 504,000 square feet<\/a> at 660 Fifth Avenue; Bloomberg renewing for 495,753 square feet<\/a> at 120 Park Avenue; Millennium Management extending from 300,000 square feet<\/a> to 438,000 square feet at 399 Park Avenue; and the United Nations Association taking 425,190 square feet<\/a> at 2 United Nations Plaza.<\/p>\n \u201cI don\u2019t want to say that Midtown is 100 percent recovered,\u201d said Slewett, \u201cbut it\u2019s definitely well along the way.\u201d<\/p>\n Given the intensity of the demand, the overall prognosis for Midtown\u2019s office market is mostly positive.<\/p>\n \u201cIn my entire career, I don\u2019t recall Midtown being in such demand,\u201d said Newmark\u2019s Falk. \u201cIn 2025, for every 25,000-square-foot tenant that relocated in Midtown, 76 percent of them took at least 10 percent more space.\u201d<\/p>\n In one strong example of both the desirability and limited availability of Midtown trophy product, BXP<\/a> is currently developing a 46-story, 930,000-square-foot office property at 343 Madison Avenue that is not expected to deliver until 2029. Despite the site still in its excavation phase as of December 2025, the developer has already signed an anchor tenant<\/a>, investment giant C.V. Starr, for around 275,000 square feet, or roughly 30 percent of the property.\u00a0\u00a0\u00a0<\/p>\n Falk cites the Starr lease as a prime example of both the strength and the current limitations of the Midtown office market.<\/p>\n \u201cC.V. Starr is a great tenant. They\u2019ve been at 399 Park Avenue for a long time,\u201d said Falk. \u201cThat deal stands out because it proves that there is tremendous demand from companies that have been in a space for a while \u2014 Starr has been in its space for over 10 years. This also shows that the market is so tight that if you need over 250,000 square feet, you\u2019re in the market four years before, because you may have to go to new construction that\u2019s planned for 2032.\u201d<\/p>\n But, as Avison Young\u2019s Johnson said, with the best locations being taken in droves by major companies in finance and law with some spillover into tech (although tech has been far more focused on Midtown South), many companies are trading their hopes for a central Midtown location for properties elsewhere that may be more Class B than Class A. Still, these second choices are usually making at least some effort to compete with Class A trophy buildings \u2014 with often far less expensive rents.<\/p>\n \u201cWith such a concentration of leasing activity in 2024 going into the first half of 2025 in trophy assets, it could only benefit commodity space,\u201d said Johnson, referring to Class B buildings. \u201cWith such tight supply around trophy and even Class A now, tenants don\u2019t have a choice because all of that space has been leased.\u201d<\/p>\n Johnson mentioned a client who is currently seeking 25,000 square feet in Hudson Yards, and how it has only three options.<\/p>\n \u201cAll they care about is glass and steel,\u201d said Johnson. \u201cThere\u2019s such limited inventory that they\u2019re going to be forced to look into a lesser-quality building with probably lower rent. Groups that always needed to be on Park Avenue are now starting to look at Third Avenue.\u201d<\/p>\n