M
anhattan office landlords are likely breathing a sigh of relief after a strong third quarter. Tenants signed leases for 23.1 million square feet, a 25.1% year-over-year increase, according to Avison Young's latest data. The vacancy rate has also dropped to 18.7%, the lowest since Q1 2021, with direct available space decreasing by 5.5% and sublet space declining by 2%.

    The market is showing signs of confidence as companies are willing to invest in large leases. There were 25 deals over 100,000 square feet in Q3, up from 18 last year. Blackstone led the way with a 1-million-square-foot renewal at 345 Park Avenue.

    The "flight-to-quality" trend continues, with 75% of leasing activity this year happening at Trophy or Class A properties. Office buildings are also showing signs of life, with cell phone tracking data indicating they're 73.4% as busy as five years ago – well above the national average.

    However, there are concerns on the horizon. Major lease expirations are looming, with banking, finance, insurance, and real estate tenants accounting for over 40% of the 42 million square feet set to expire from 2025 to 2030.