May 21, 2025
- WIN👍 Leasing Velocity Surges with year-over-year growth of 38.3% as seen in February’s demand exceeding the ten-year average driven by huge finance firms.
- WIN👍 Sublet Supply Shrinks as Manhattan’s sublet inventory declined for five consecutive months, reaching the tightest level since 2020.
- FAIL👎 Midtown South Weakens due to a leasing decline of 60% month-over-month and 33% year-over-year, falling far below historical averages.
The early months of 2025, specifically February, marked a significant turning point for the Manhattan office market with compelling indicators across leasing volume, absorption, and availability. While the citywide leasing volume slightly contracted month-over-month, it far outpaced long-term benchmarks, highlighting a growing sense of confidence among tenants and investors alike.
At 3.18 million square feet (SF), February’s leasing activity was 18.6% above the ten-year monthly average of 2.68 million SF and exceeded the 2024 monthly average of 2.78 million SF. Year-over-year, leasing velocity surged 38.3%, driven by a handful of major transactions. This momentum is fueling a sense of cautious optimism that Manhattan’s office sector is not just stabilizing—but on the verge of a genuine recovery.
Still, challenges remain. Average rents have not fully rebounded to pre-pandemic levels, and some submarkets, particularly Midtown South, are dragging. Yet with positive net absorption for eight consecutive months and availability rates tightening across key areas, the broader narrative is tilting positive.
Major Tenants Headline Success
1. Notable Leasing Activity Anchored by Major Tenants
The three largest transactions in February underscore robust tenant demand for premier properties. Leading the charge is Jane Street, a global quantitative trading firm, with a substantial 984,000-square-foot expansion at 250 Vesey Street. Demonstrating their continued commitment, iCapital, a global fintech platform driving access and efficiency in alternative investing, has executed a significant 220,000-square-foot lease extension at the prominent 60 East 42nd Street. Further bolstering this success, Mizuho Financial Group, a leading global financial institution, has secured a 151,000-square-foot sublease at the prestigious 1285 Avenue of the Americas. These landmark deals clearly highlight the sustained appetite for high-quality commercial space in key business districts.
2. Sustained Absorption and Tightening Availability
Manhattan posted positive absorption for the eighth straight month in February, recording a gain of 900,000 SF. The total availability rate tightened by 0.1 percentage points to 16.1%, the lowest since March 2021. This tightening trend is a strong indicator of market health and demonstrates a return of tenant confidence in long-term occupancy.
3. Sublet Inventory Recovery Accelerates
Sublet availability declined for the fifth consecutive month, shedding 1.63 million SF to reach 15.56 million SF—its tightest level since September 2020. This marks a dramatic reversal of earlier trends: while sublet supply had ballooned by over 30% since March 2020, recent activity has nearly halved the excess in some submarkets. For instance, Midtown South’s sublet availability is down nearly 44.9% from its 2023 peak.
Challenges: Uneven Rent, Vacancy
1. Midtown South Buckles
Despite the broader market’s improvement, Midtown South struggled. February’s leasing volume plummeted over 60% month-over-month and was down 33% year-over-year to just 570,000 SF—38% below its ten-year average of 920,000 SF. The largest lease during the month was Netflix’s modest 33,000-SF expansion, a sharp drop from January’s three 100,000+-SF deals.
2. Rent Recovery Remains Uneven
Although average asking rents edged up in some areas—such as a 0.7% increase citywide to $73.82/SF—year-over-year rents were still down by 0.9% and remain 7.1% below March 2020 levels. In Midtown South, the February Price per SF dipped slightly to $78.03/SF, the lowest since October 2021. Downtown’s average Price per SF, at $57.79/SF, remains 12.2% below its pre-pandemic high of $65.79/SF.
3. Persistent Legacy Vacancy
While recent net absorption is encouraging—7.03 million SF positive over the past three years—the market still faces a cumulative loss of 32.85 million SF since March 2020. Midtown alone has added several large blocks of new space even as availability tightened. Locations like 1633 Broadway, 237 Park Avenue, and 707 Eleventh Avenue continue to introduce more than 100,000 SF of new availability.
2025: Slow and Steady Momentum
Despite structural headwinds and uneven recovery across submarkets, Manhattan’s office market is gaining steam. Positive absorption, tightening availability, and a wave of strategic leasing—especially from financial and tech tenants—are fostering renewed optimism. A reduction in subletting and stable rental rates also suggests that the worst of the pandemic’s market disruption may be behind us.
Looking ahead to the remainder of 2025, the office sector in Manhattan is likely to continue its slow but steady rebound. Leasing volumes are on track to outpace 2024, particularly if high-profile renewals and expansions continue. While challenges persist in pricing and legacy vacancy, current momentum suggests a gradual normalization of market fundamentals—one square foot at a time.
Navigating office and commercial opportunities in New York City? NYCCREA is your one-stop solution for the latest news, proven strategies, and exclusive opportunities in commercial real estate in New York City and Western Nassau County NY. Reach us at nyccrea.com
Reference:
Manhattan Office Market Snapshot: New York City, February 2025, Colliers
