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 an increase in tech hiring, particularly for artificial intelligence.

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

Colliers found it was the strongest single quarter of island leasing since the fourth quarter of 2019. For all of 2025, leasing volume was the highest since 2019 and only 2.4% below 2019’s pre-pandemic total.

“Manhattan’s strong performance in 2025 was not a fluke, but it was a continuation of the improvement we began to realize in 2024,” said Frank Wallach, executive managing director of New York research and business development at Colliers.

“Demand in 2025 was a continuation of that trend, although significantly accelerated by factors such as tenant flight to quality to attract and retain talent, return-to-office trend implementation, large-scale expansions by major tenants – such as Amazon, NYU and BlackRock – and the emerging AI industry leasing space throughout Manhattan.”

Wallach saw increased demand from a variety of industries, including finance, tech, legal, education, medical non-profits and government.

According to Colliers, the supply of available office space is still much higher, about 37%, than at the start of the pandemic in March 2020, but much lower than at the peak of the pandemic in February 2024. As demand increases, more supply is slowly being absorbed, and Manhattan now has the lowest supply since November 2020.

Tight supply is ultimately helping drive up rents. Colliers found that Manhattan’s average asking rent was 1.5% higher in Q4 than the previous quarter and, at $76 per square foot, was Manhattan’s highest average since October 2020. The average asking rent for the highest tier, so-called Class A product, which is new construction, rose 1.6% to $83 per square foot, Colliers said.

Class B office product is older but located in good locations. It is now being seen that homeowners are investing in upgrades 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.

The flight to quality continues, with 69% of all leased space in four- and five-star buildings, up from 66% in 2024, according to a separate report from CoStar. It found that every one of the 15 largest office leases signed during the year took place at four- or five-star properties. For example, Deloitte’s 800,000-square-foot commitment at 70 Hudson Yards, a premiere Manhattan office building, was the largest lease of the year.

Overall quarterly net absorption, which is a measure of how much physical space tenants are actually occupying and how much space they are leaving, was positive by about 4 million square feet, according to the Colliers report. For full 2025, it was positive by 15.56 million sq ft, which also included 2.14 million sq ft of space removed from the market for planned conversion to non-office use.

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

Despite the market recovery, there is still much more surplus office supply than before the pandemic.

“Despite increased tenant demand and reduced availability in 2025, the Manhattan office market has only drawn down half of its post-pandemic available excess supply. The healthy demand and conversion of underutilized office properties recorded in 2025 should continue in 2026 and 2027,” Wallach said.