Manhattan’s commercial real estate market is headed for a major fortune. 2024 witnessed a surge in leasing activity, reaching pre-pandemic levels and hitting milestones in the industrial, retail, multifamily, and hotel sectors. Major industries such as banking, finance, insurance, and real estate continue to prevail in leasing transactions, while other businesses like media and entertainment surge significantly, signaling a robust 2025.
The fourth quarter of 2024 also saw a significant drop in available office space, with the overall availability rate hitting a four-year low of 17.9%. This dwindling supply, coupled with robust leasing activity throughout the year, underscores the current strength of the Manhattan office market. Furthermore, a notable shift towards higher-quality space is evident, with Class A properties experiencing the highest leasing activity in over a decade, demonstrating a 12.8% year-over-year increase. This surge in demand for significant spaces signals a positive trajectory for Manhattan’s commercial real estate in 2025.
Positive Trends in 2025
- Large-block Leasing
2024 leasing activity in Manhattan has reached 35.9 million square feet (msf) – 17.2% higher than that of 2023. The number of 100k+ sf transactions in 2024 has reached the highest annual amount since 2019 with 44 large transactions. This increase in large-block leasing activity is a positive sign for 2025.
- More Office Spaces Occupied
Manhattan availability rate hits the lowest value since 2020. Manhattan’s overall availability rate of 17.9% in Q4 2024 marks the lowest availability rate in the last four years. This drop came from a decrease in both direct and sublet available space, 7.6 msf and 1.9 msf, respectively.
- Class A Supremacy
2025 would see the continuation of the domination of Class A properties, following their 2024’s performance accounting for the largest share of leasing activity in over a decade. Increasing demand for higher tier class A product led to a 12.8% increase year-over-year. Almost half of the large block leasing transactions (100k+ sf) in 2024 occurred in the Class A category. Media, PR, telecom & entertainment, banking, finance, insurance & real estate, and law firm companies were the most active in seeking class A space, representing 60.1% of demand.
- Industrial Sector Stability
The industrial real estate market continues to thrive, driven by sustained e-commerce and logistics demands, according to a JPMorgan Chase report. In the third quarter of 2024, industrial vacancy rates remained steady at 6.8%, indicating robust demand for warehouses and related properties.
- Retail Resurgence
The Manhattan retail leasing market closed out 2024 on a high note, marked by the lowest availability in a decade and steady rent growth for prime locations. Availability rates across the borough’s premier retail corridors dropped to 13.9%, a significant improvement from the pandemic peak of 27.8% in 2021. Retail leasing activity in 2025 is expected to pick up from the acceleration in Q4 2024, with 4.4 million square feet transacted in Manhattan for the year, a 26.1% increase from 2023.
Notes for Businesses
- Return to Office Rises
The consulting, research, accounting, and recruiting industry has thrived, reaching 86.7% of its pre-pandemic 2019 levels. Meanwhile, key sectors like banking, finance, insurance, real estate, and government have also seen significant returns, with office busyness figures approaching 85%, largely driven by robust return-to-office mandates.
- Newer Buildings Sought
Pre-2010 Manhattan buildings experienced a rise in availability from 12.7% in Q1 2020 to 18.2% in Q4 2024. Conversely, availability in newer Manhattan buildings (post-2010) contracted from 17.3% to 15.5% during the same period.
- Banking, Finance, Media Prevail
While the banking, finance, insurance, and real estate sector continues to dominate Manhattan’s office market due to its substantial presence, 2024 witnessed a notable shift in the landscape, which may continue this year. Media, PR, telecom, and entertainment companies experienced a significant surge in leasing activity, while law firms saw a year-over-year decline.
Continued Growth in 2025
As we progress through 2025, New York City’s commercial real estate market is poised at a promising juncture. The resilience demonstrated in 2024, coupled with emerging positive trends, suggests an optimistic outlook. Sectors like industrial real estate and retail are showing signs of strength, and strategic investments in prime properties are paving the way for future growth.
With 2024 witnessing a post-Covid high in Manhattan leasing activity and the lowest availability rate since 2020, demand for prime spaces remains strong. The surge in leasing activity for Class A properties in 2024 and the retail market’s lowest availability in a decade are trends likely to persist this year. The strong fundamentals of the New York City market suggest continued growth and resilience in 2025. (NYCCREA)
References:
Manhattan office market report Q4 2024, Avison Young
Manhattan Americas Marketbeat Retail Q4 2024, Cushman and Wakefield
