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Are Small to Mid-Market Office Owners About to Feel Pressure as Class A Dominates in 2026?

BY

Steven Llorens

January 14, 2026

  • Manhattan office leasing hit 41.92M SF in 2025, up 25% year over year and just 2.4% below pre-COVID 2019 levels.
  • Class A space dominated, capturing 74.2% of Q4 leasing activity as tenants doubled down on quality.
  • Rents and leverage are rising, with asking rents up 3.5% to $76 PSF and availability tightening for the seventh straight quarter.


At NYCCREA, we see 2025 as the clearest signal yet that Manhattan’s office market has turned a corner. Based on the report of CRE Daily, total leasing volume reached 41.92M SF, making it the strongest year since 2019. Demand rose sharply, nearly matching pre-pandemic norms and confirming that office is no longer in recovery mode—it is back in motion.

This surge was not evenly distributed. Midtown led the charge with 19.32M SF leased, exceeding pre-pandemic highs and reaching levels not seen since 2018. Large, confidence-driven commitments, including a 460,000 SF lease by Moody’s at 200 Liberty Street, helped close the year on a robust note. From our perspective, tenants are no longer waiting on the sidelines. They are making long-term decisions again.

As we head into 2026, a critical question we hear from small to mid-market office owners is whether the resurgence of Manhattan office truly benefits everyone—or mainly rewards the top tier. Class A space continues to dominate leasing activity, and rising rents are widening the gap between prime and non-prime assets. From our perspective as NYCCREA brokers, the market’s rebound is real, but it also brings growing pressure on owners outside the Class A category to compete in an environment where quality, amenities, and location increasingly drive tenant decisions.

The real question is: how will small and mid-market owners adapt before this divide becomes even harder to close?


While the Manhattan office rebound is real, it is primarily driven by a “flight to quality” that favors Class A assets, leaving small to mid-market owners under intense pressure to upgrade and compete.
(Photo by Matthis Volquardsen via Pexels)

Class A in Demand As Rents Rise

  1. Class A Demand Leads the Market

    According to CRE Daily, Class A offices accounted for 74.2% of leasing volume in Q4 2025, far above their 64.4% share of inventory. This clear flight-to-quality trend reflects tenant priorities: premium locations, modern layouts, and top-tier amenities. We also saw growth in $150-plus and $200-plus PSF transactions, with select corridors posting record-high asking rents.

  2. Supply Tightens as Landlord Leverage Returns

    Average asking rent increased 3.5% year over year to $76 PSF, the highest level since October 2020. At the same time, the overall availability rate declined to 13.9% in Q4, marking the seventh consecutive quarter of stability or tightening supply. This is the longest such run since 2007, signaling that prime landlords are regaining negotiating power.

  3. Premium Space Outperforms Despite Market Challenges

    Sublet inventory has fallen below early pandemic levels, and asking rents for top-tier Class A assets continue to climb. Even with uneven occupancy across the market, tenant appetite for high-quality space remains strong, reinforcing a two-tier market dynamic.
The clear “flight to quality” continues to dominate the market as tenants increasingly prioritize premium locations and high-end amenities over standard office space. (Photo by Ahmer Qureshi via Pexels)

What CRE Owners & Investors Must Consider in 2026

  1. Stronger Pricing Power for Class A Assets

    With rents rising and availability tightening, we expect continued pricing strength for well-located, high-quality office buildings in 2026.

  2. Wider Gap Between Prime and Secondary Assets

    The dominance of Class A leasing suggests that older or less competitive buildings will face increasing pressure, pushing owners toward repositioning or alternative strategies.

  3. Broader Tenant Confidence Across Sectors

    Financial, insurance, and real estate firms led Q4 activity with 37% of leasing, followed closely by TAMI (technology, advertising, media, information) at 34%, and professional services at 14%. The rebound in tech leasing tells us momentum is spreading beyond traditional anchors.
Led by strong activity from finance, tech, and professional services, the market’s momentum is expected to drive continued rent growth for high-quality office buildings throughout 2026. (Photo by Vlada Karpovich via Pexels)

2026 Forecast: Our Take as NYCCREA Brokers

Looking ahead, we believe 2026 will be defined by consolidation around quality. Leasing momentum, rising rents, and sustained supply tightening point to a market that is no longer just stabilizing but strengthening. From where we stand, Manhattan office is entering 2026 with renewed confidence—led by Class A assets and tenants ready to commit for the long term.

Our 2026 tip for small to mid-market office owners and investors: Prioritize visible upgrades and flexible layouts that improve tenant experience, because as Class A dominates, staying competitive matters more than asset size alone.

For the latest news, proven strategies, and exclusive opportunities in commercial real estate in New York City and Western Nassau County NY, visit us at www.nyccrea.com

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