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Tech Demand Fuels New York’s Office Recovery<\/p>\n
Manhattan’s office leasing market closed 2025 on a high note, registering its strongest quarterly activity since the end of 2019, as tech-driven demand, shrinking availability, and rising rents signal a sustained recovery heading into 2026.<\/p>\n
According to Lee & Associates NYC’s fourth-quarter report, Manhattan tenants signed 11.6 million square feet of leases in Q4, bringing total annual leasing to 42 million square feet–a 7 percent increase over 2024. Availability tightened for the seventh consecutive quarter to 13.9 percent, while net absorption remained positive at 3.7 million square feet.<\/p>\n
“The office recovery is no longer theoretical–it’s measurable,” said Todd Korren, Executive Managing Director and Director of Leasing at Lee & Associates NYC. “Tenants are committing to space at scale again, and fundamentals continue to tighten across the borough.”<\/p>\n
Class B Assets See Record Rents Amid Broadening Leasing Activity<\/p>\n
While marquee Class A deals led the quarter–Moody’s 461,567-square-foot lease at 200 Liberty St. and Bloomberg’s 435,355-square-foot renewal at 120 Park Ave.–Class B properties are emerging as key beneficiaries of the tightening market.<\/p>\n
In Midtown, Class B availability dropped to 14.8 percent, pushing rents to $55.65 per square foot, with quarterly leasing surpassing 1 million square feet. Midtown South saw Class B rents climb to $63.05 per square foot even as availability declined. Borough-wide, Class B asking rents hit a record $68.61 per square foot.<\/p>\n
“As prime supply tightens and new development remains limited, well-located Class B assets are capturing renewed attention,” Korren said. “Owners who have reinvested are competing effectively, and tenants are responding.”<\/p>\n
Tech and AI Firms Drive Leasing Momentum<\/p>\n
Technology and AI companies were prominent drivers of Q4 activity. Downtown leasing nearly doubled quarter-over-quarter to 1.8 million square feet, with large-block deals at One World Trade Center and One Madison Ave. Midtown South Class A leasing reached nearly 633,000 square feet, reflecting strong demand from fintech and AI tenants.<\/p>\n
Lee & Associates executives Justin Myers and Dennis Someck recently completed a 6,000-square-foot lease for AI company SceniX at 80 Eighth Avenue.<\/p>\n
“We’re seeing next-generation companies take meaningful space as they prioritize access to talent and high-quality environments,” Myers said. “That demand is reinforcing pricing and reducing availability in multiple submarkets.”<\/p>\n
Supply Shifts Reinforce Market Tightness<\/p>\n
Office-to-residential conversions, coupled with limited new development, are reshaping Manhattan’s supply landscape. Midtown availability dropped to 13.5 percent–the lowest since 2020–while Downtown fell to 14.1 percent. Midtown South recorded its sixth consecutive quarter of declining availability, down to 15.0 percent.<\/p>\n
“As conversions permanently reduce segments of supply, the remaining competitive inventory becomes more valuable,” Korren noted. “That dynamic is contributing to rent growth and stronger positioning for quality assets across multiple vintages.”<\/p>\n
Rents Climb as Market Stabilizes<\/p>\n
Average Manhattan asking rents rose to $75.80 per square foot in Q4, with Class A averaging $87.54 per square foot. Office visitation strengthened toward year-end, reaching roughly 81 percent of December 2019 levels.<\/p>\n
“The consistency of tightening across Midtown, Midtown South, and Downtown points to a healthier and more balanced market,” said Woody King, Senior Managing Director. “Heading into 2026, the conversation has shifted from stabilization to positioning.”<\/p>\n