For example, in April, financial advisory firm Deloitte agreed to lease 800,000 square feet<\/a> at 70 Hudson Yards, a more than 60-story, 1.1 million-square-foot office skyscraper being developed by Related Companies and Oxford Properties on Manhattan\u2019s West Side. Deloitte will leave its current headquarters at 30 Rockefeller Plaza for the new building, which isn\u2019t set to be completed until late 2028.<\/p>\n Then, in September, global law firm Simpson Thacher & Bartlett agreed to take roughly 700,000 square feet<\/a> at Extell Development\u2019s 570 Fifth Avenue development, which is set to become a 29-story office and retail building anchored on the retail side by Ikea. That project is also expected to top out by the end of 2028.<\/p>\n Most recently, BXP<\/a> reached a tentative deal<\/a> in October with insurance and investment giant C.V. Starr to lease roughly 30 percent, or 275,000 square feet, of its $2 billion 343 Madison Avenue office development, which should be completed by 2029.<\/p>\n The sudden uptick in anchor tenant signings blends with other trends spurring once skittish developers toward their finish lines. Those trends include sterner return-to-office mandates and a highly active office market boasting healthy leasing<\/a> overall.<\/p>\n \u201cThe spark was because the financial service sector, and all of the law firms, consulting firms and accounting firms that are clustered around the financial service sector, have been in a serious organic growth and consolidation mode,\u201d Mary Ann Tighe, CEO of CBRE<\/a>\u2019s New York tri-state region, told Commercial Observer.<\/p>\n \u201cThis growth sector in New York believes deeply that the in-office experience is essential,\u201d Tighe added. \u201cAnd, even further than that, they realize that the quality of real estate is a recruiting tool, and so they\u2019re looking to upgrade their environment. They\u2019re looking to bring people together. And that\u2019s an equation that equals a newer building and a big block of space.\u201d<\/p>\n Newer buildings and big blocks of space are certainly on the way. Besides the ones listed above, there\u2019s BXP\u2019s 3 Hudson Boulevard<\/a>, RXR<\/a> and TF Cornerstone\u2019s 175 Park Avenue<\/a>, Related\u2019s 625 Madison Avenue<\/a>, Tishman Speyer\u2019s 99 Hudson Boulevard, Silverstein Properties\u2019 2 World Trade Center<\/a> (where American Express is rumored to be the anchor tenant), and Vornado Realty Trust and Rudin\u2019s 350 Park Avenue for Citadel\u2019s headquarters<\/a>, to name a few. J.P. Morgan Chase\u2019s new owner-occupied, 2.5 million-square-foot HQ at 270 Park Avenue<\/a> also just opened, with a potential de facto J.P. Morgan neighborhood<\/a> on the way too.<\/p>\n By the sound of it, things are going swimmingly for developers and tenants alike. So what\u2019s the problem? Well, despite millions of square feet coming onto the office market with these new projects, there still isn\u2019t enough available \u2014 and suitable \u2014 Class A offices in Manhattan, in part because these larger anchors are already claiming the space.<\/p>\n Manhattan\u2019s overall office inventory dropped from 466.1 million square feet in the second quarter of 2025 to 449.4 million square feet during the third quarter, according to a recent report from Savills<\/a>.<\/p>\n That\u2019s 16.7 million square feet of office inventory deleted in just one quarter. The culprit could likely be office-to-residential conversions, as 4.1 million square feet of conversions had already commenced in 2025 as of August and another 8.8 million square feet are on the way, according to a recent report from Cushman & Wakefield<\/a>. That\u2019s compared to the total 3.3 million square feet of conversion starts recorded in 2024.<\/p>\n However, not all of that 16.7 million square feet was vacant.<\/p>\n \u201cThey had office occupiers in them, and so those office occupiers are now forced to look for new space, and they\u2019re actually looking more into the middle of the market for choices,\u201d said Peter Riguardi, chairman and president of JLL<\/a>\u2019s New York region.<\/p>\n \u201cRight at the same time, at the top of the market, there\u2019s not a lot of prime new choices,\u201d Riguardi said. \u201cSome occupiers who wanted to be in Hudson Yards or new buildings are being pushed into the middle. So it\u2019s affecting the whole ecosystem of office supply.\u201d<\/p>\n What happens next is a cycle: New real estate comes on the market, that space gets leased up almost immediately by top occupiers, and the rest of the market\u2019s tenants are left to fill in the gaps. Not to mention, new tenants entering Manhattan will have a pretty hard time finding any leftover space.<\/p>\n \u201cWhat we are witnessing in the market is akin to musical chairs among large anchor tenants,\u201d said Paul Glickman, vice chairman and international director in JLL\u2019s New York office. \u201cWhen the music stops, we are very likely not going to have enough suitable sites to accommodate the demand.\u201d<\/p>\n In fact, Manhattan\u2019s overall office vacancy, while not yet at pre-pandemic numbers<\/a>, hit a five-year low with a rate of 14.8 percent during the third quarter of 2025, according to a report from JLL. The drop was mainly due to 35 large-block deals signed during the first nine months of the year, including 11 in the third quarter.\u00a0<\/p>\n In addition, the increased competition for high-quality office space has driven rents to record highs, with average rents in Midtown increasing by 2 percent from the second quarter to $85.44 per square foot in the third quarter, according to JLL. Manhattan\u2019s trophy office stock \u2014 which has seen a 38 percent decrease in vacancy since the third quarter of 2024, down to a mere 7.6 percent \u2014 also saw rents increase by 3 percent quarter- (Most of Manhattan\u2019s new office developments will have asking rents north of $200 per square foot, according to sources.)<\/p>\n As a result of the competition, most trophy office buildings in popular areas such as Bryant Park and along Park Avenue are nearly fully leased, with vacancy rates around 1 percent and rents in the hundreds of dollars per square foot. At the Seagram Building, for example, rents are around $285 per square foot<\/a>. And, at One Vanderbilt, an eye-catching office tower that opened toward the start of the pandemic, there\u2019s no space left.<\/p>\n \u201cIt\u2019s a very interesting paradigm in the marketplace,\u201d Glickman said. \u201c2024 and 2025 have been incredibly strong markets with enormous leasing velocity and absorption, particularly at the top of the market. Tenants are back, they\u2019ve returned to work stronger than expected, and they are growing.<\/p>\n \u201cBut if you\u2019re a big corporate occupier and you want to keep up with the Joneses and find a standout headquarters for recruitment \u2014 like so many tenants did with Manhattan West, Hudson Yards and One Vanderbilt \u2014 you\u2019re not going to easily find new product,\u201d Glickman added.<\/p>\n And, even if they wanted to, smaller office tenants won\u2019t be able to keep up \u2014 in fact, they\u2019re already being priced out.<\/p>\n So far in 2025, 101 lease transactions with rents between $100 and $149 per square foot have been signed, as well as 26 transactions with rents between $150 and $199 per foot, and 16 transactions with rents over $200 per foot, according to data from CBRE. That total of 143 transactions covers 19.1 percent of the overall office leasing velocity in terms of square footage recorded so far in 2025, and 15.8 percent of the overall velocity in terms of transaction count.<\/p>\n Trophy and Class A properties have also captured 81.1 percent of Manhattan leasing activity so far in 2025, compared to 69.8 percent in 2023, according to a report from Avison Young<\/a>.<\/p>\n All that makes the search for lower rents and quality space extremely difficult, especially as large office tenants continue to soak up trophy space and drive rents to levels that smaller tenants find almost unbearable. Plus, they\u2019re leaving little to no space for smaller tenants to expand or even sign new leases.<\/p>\n \u201cThere\u2019s not enough of the right kind of space,\u201d said William Elder, executive vice president of RXR and managing director of the firm\u2019s New York City division. \u201cThere\u2019s a war for space going on in some of the prime locations. You\u2019ve got buildings being taken out of the inventory for conversion into residential. There\u2019s a pipeline of tenants entering the market that is as robust as ever.\u201d<\/p>\n As a result, the limited supply of new construction is \u201cforcing tenants to compete for space against one another,\u201d according to Steven Durels, executive vice president and director of leasing at SL Green Realty<\/a>, whose portfolio includes One Vanderbilt.<\/p>\n \u201cYou\u2019re seeing a rapid increase in rents,\u201d Durels added. \u201cThat\u2019s what\u2019s bringing our market back to a very healthy place, while at the same time flushing out the bottom part of the market.\u201d<\/p>\n It\u2019s not unfamiliar territory, either. Other eras have brought a lot of new prime space while disposing of aging stock.\u00a0<\/p>\n \u201cIt\u2019s like the three baby bears: Mama Bear, Papa Bear, Baby Bear. None of the porridges seem to be the right temperature,\u201d Riguardi said. \u201cWe never quite have enough space at times, and then at times we have too much space.\u201d<\/p>\n On the bright side for tenants, new office developments in Midtown are slowly helping to bridge the gap. The developments are gradually but surely giving existing office assets in Midtown \u201ca little bit of breathing room\u201d as anchor tenants move to new space, allowing those assets to \u201cserve existing clients better,\u201d according to Hilary Spann, executive vice president of BXP.<\/p>\n Anchor tenants are indeed shifting their gaze to new stock as developers vie for their attention. In fact, developers that have already secured an anchor tenant lease are way ahead in the game, as those pre-leasing deals are \u201cthe solution\u201d for some properties to move forward with construction financing, according to CBRE\u2019s Tighe.<\/p>\n \u201cWhat would be optimal for most developers is if they have the rent start as close to completion as possible,\u201d Tighe said. \u201cThe tenant is always the solution, and, in the case of new construction in New York, it\u2019s always the solution.\u201d<\/p>\n And, when it comes to actually getting these anchor tenant deals signed, it\u2019s pretty much an \u201cexact science,\u201d according to Riguardi, who has completed several major leases for anchor tenants during his 23-year career at JLL.<\/p>\n \u201cThe developer is constrained by lending requirements, and the occupier is confined by what they want for flexibility in their occupancy and what they want for branding and identity,\u201d Riguardi said. \u201cAnd those two needs need to match up, or you can\u2019t have a deal.\u201d<\/p>\n Anchor tenant leases \u2014 which often have a minimum length of 15 to 20 years in order for developers to secure financing \u2014 also all require the same basic elements, Tighe added.<\/p>\n \u201cWith anchor leases, you\u2019re solving for three things,\u201d Tighe said. \u201cYou\u2019re solving for scale. You\u2019re solving for the creditworthiness of the tenant, because that\u2019s what you\u2019re taking to the bank to get your loan. And the third thing you\u2019re solving for is a tenant who can be in the base of the building. You\u2019re not doing a 2 million-square-foot building and putting the anchor at the top, because what year is the top coming?<\/p>\n \u201cAnd maybe here\u2019s a fourth component \u2014 you need a business that can look five years in advance on their real estate,\u201d Tighe added. \u201cYou\u2019re signing for something that doesn\u2019t exist, and you have to believe that your business is going not only to be in existence, but is going to have the same physical requirements that you envision today, five years hence. So it\u2019s a very small universe of people who can anchor.\u201d<\/p>\n Spann said that that\u2019s exactly the sort of tenant BXP negotiates with.<\/p>\n \u201cBecause we have premier assets, we tend to have businesses that do long-range planning, and have a five-year or 10-year strategy,\u201d Spann said. \u201cThey are focused on their business strategy, and they are taking down space in accordance with the needs of that strategy. So real estate is really an input to the business, and for most businesses that business strategy is actually more important than the real estate strategy.\u201d<\/p>\n But trust also goes both ways. Reputation is \u201chuge\u201d for developers looking to secure anchor tenants and promise them high-quality, amenity-filled spaces, Tighe said.<\/p>\n \u201cBreaking into the universe of skyscraper development requires complete faith on the part of the anchor that the capital\u2019s there and that [a developer] knows how to build,\u201d Tighe said. \u201cYou should not be learning on the job. You better have built somewhere else, and you certainly shouldn\u2019t be starting the first time in New York. The sponsor has to be able to demonstrate a capacity not only to capitalize, but to construct.\u201d<\/p>\n BXP is certainly aware of that. The real estate investment trust\u2019s 1.8 million-square-foot development at 3 Hudson Boulevard will likely require an anchor tenant in the range of 600,000 to 700,000 square feet in order to secure construction financing, Spann said.<\/p>\n It managed fine at 343 Madison. BXP is in the process of turning the former Metropolitan Transportation Authority HQ into a 46-story, 930,000-square-foot tower with offices, dining spaces, terraces and a seemingly endless amount of amenities. The first phase of construction on that project will be completed in June 2026, while the second and final phase is set to be done in 2029, Spann said.<\/p>\n Because 343 Madison is being built on a smaller scale than 3 Hudson Boulevard, BXP is funding construction off its balance sheet since it\u2019s easier to fund a smaller development in the interim, Spann said. In addition, BXP has no joint venture partner at 343 Madison, allowing it to control the entire project. That made C.V. Starr\u2019s anchor lease the icing on the cake.<\/p>\n \u201cIf you have the capital available to fund, you don\u2019t have to have a pre-lease tenant,\u201d Spann said. \u201cBut, for most developers in the market, if you require equity capital or debt capital, those capital providers are going to want to see some level of pre- Across the street from BXP\u2019s project, SL Green is betting on that (no casino<\/a> pun intended). This month, SL Green closed on its deal to buy the former Brooks Brothers building<\/a> at 346 Madison Avenue \u2014 as well as the adjacent 11 East 44th Street \u2014 for a total of $160 million, with plans to build a 41-story office building.<\/p>\n SL Green is beginning the process of soliciting architectural designs for the roughly 800,000-square-foot project and plans to deliver the building to tenants in late 2030, according to Durels. He added that SL Green will likely build the project on spec without having a significant anchor tenant at the outset, similar to its highly successful One Vanderbilt development.<\/p>\n \u201cThis one by comparison to One Vanderbilt should be very straightforward,\u201d Durels said. \u201cThe entire site sits on bedrock, while One Vanderbilt was up against the shuttle subway on one side of the building, and at the north corner of the building had Metro-North tracks that cut across the corner of the site. So it was a much more complicated site, whereas the Brooks Brothers site is very straightforward.\u201d<\/p>\n RXR and TF Cornerstone have an equally optimistic outlook for their development near Grand Central Terminal. The two developers are replacing the Grand Hyatt Hotel at 175 Park Avenue with a dramatic 1,600-foot office-and-hotel tower known as 175 Park<\/a> \u2014 a project that Tighe calls the \u201cmost ambitious skyscraper\u201d being built in the city due to its sheer scale and complexity.<\/p>\n Some of those complex details include demolishing the 26-story Hyatt hotel down to the ground floor in order to prevent major disruptions to train activity in Grand Central, as well as removing several large structural columns that block access to the subway station.\u00a0<\/p>\n RXR and TF Cornerstone also plan to build a new public train hall and a 12,000-square-foot passageway linking to Long Island Rail Road train platforms. Elder said RXR plans to break ground next year and is \u201cconfident\u201d it will have an anchor tenant before construction starts.<\/p>\n To put it simply, there\u2019s a lot of activity going on in the New York City office market now. And, despite new developments causing a so-called \u201cmusical chairs\u201d effect for today\u2019s tenants, it seems as if the city will mostly reap the benefits rather than the drawbacks.<\/p>\n \u201cIt\u2019s an exciting time for New York with these projects going on and the amount of tenant activity,\u201d Elder said. \u201cIt\u2019s been a tough road for the last few years, but now New York is back. It\u2019s exciting.\u201d<\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/us-ny\/wp-content\/uploads\/2025\/10\/175-Park-Avenue_2-credit-RXR-WEB.jpg\" "\\"Anchor")
A rendering of 175 Park Avenue. RENDERING: Courtesy RXR<\/p>\n
over-quarter to $132.24 per square foot, JLL found.<\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/us-ny\/wp-content\/uploads\/2025\/10\/BXP-343-Madison_View-31_Reception-Lounge-1-rendering-credit-Volley-Studio-WEB.jpg\" "\\"Anchor")
A rendering of a lounge inside 343 Madison Avenue. RENDERING: Courtesy Volley Studio<\/p>\n
leasing just to get comfortable with the fact that it\u2019s something that will be desirable at the end of development, and that they\u2019ll make a return on their investment.\u201d<\/p>\n