Manhattan office leasing demonstrated historically strong performance in the first half of 2026. According to Colliers' second-quarter report, just under 23 million square feet of office space was leased in the past two quarters. The brokerage firm described this as the strongest leasing momentum in a first half-year since 2002.
Franklin Wallach, Executive Managing Director for Research and Business Development at Colliers, told Commercial Observer that the recovery had manifested itself in multiple ways – on both the demand and supply sides, as well as in pricing. These results should be very welcome to property owners in New York City. Demand outstripped tightening supply, law firms and tech companies secured large spaces, and average asking rents rose significantly.
Strong Demand Drives the Market
Leasing volume in the second quarter amounted to 11.02 million square feet, with positive net absorption of 3.51 million square feet. A key factor in this activity was law firm Simpson Thacher & Bartlett's lease for 916,000 square feet at Extell Development's office development at 570 Fifth Avenue in May. Manhattan's law firms, which consistently require large amounts of office space, accounted for five of the quarter's top-10 lease transactions, according to Wallach. These major tenants included Cleary Gottlieb Steen & Hamilton with a 475,000-square-foot deal at One Liberty Plaza and Alston & Bird with 169,664 square feet at 51 West 52nd Street.
Average asking rents for office space rose to $78.03 per square foot, representing an annual increase of 5.7 percent. According to Colliers, this is the strongest annual half-year growth since 2016. While the city as a whole is still working towards returning to pre-pandemic standards, asking rents along sought-after corridors such as Park Avenue in Midtown have already surpassed 2020 values. Average rents along the Avenue rose by 4.6 percent during the quarter to $119.62 per square foot, an increase of almost 14 percent since March 2020. Manhattan's Class A office market recorded $92.19 per square foot in the last quarter, with an overall availability rate of 13 percent, according to Savills' second-quarter report. Hudson Yards was the most expensive submarket, averaging $153 per square foot.
Outlook and Key Tenant Types
The leasing activity of 11.02 million square feet in the second quarter did not quite reach the 11.78 million square feet of the first quarter of 2026, which was significantly driven by Bank of America's mega-deal for 2.4 million square feet at One Bryant Park. Nevertheless, the momentum of the second quarter was well above Manhattan's 10-year quarterly average. Wallach noted that if the second half of the year merely mirrored the first half, the highest annual leasing volume since 2000 could be achieved.
- —Law firms drove the market in the last quarter, accounting for 30 percent of activity.
- —The technology sector continued to perform strongly, with 800,000 square feet of artificial intelligence leases in the second quarter, surpassing the entire annual demand of 2025.
- —Health tech platform Tennr led the AI market with a deal for 124,733 square feet at 345 Hudson Street.
- —Google's extension for 410,556 square feet at nearby 315 Hudson Street led the Technology, Advertising, Media, and Information (TAMI) sectors overall.
Amidst strong demand, the availability rate for offices in Manhattan – a measure of vacant or soon-to-be-vacant space – fell to 13 percent during the quarter. Notably, in Midtown, availability is only 3 percent above the March 2020 level, according to Colliers. Availability rates also fell in Midtown, Midtown South, and Lower Manhattan, though their relative positions in the city's recovery vary. With 68 million square feet of available office supply, Manhattan's availability remains significantly above March 2020 figures but has recovered by more than 30 percent since the peaks of 2024. Sublease supply has notably fallen below the comprehensive March 2020 benchmark. Wallach highlighted that this quarter had achieved milestones that were a decade, if not decades, in the making, and it had been a 'wow moment' analysing the data.
