Sunday Summary: The Manhattan Office Market’s Return to Form

After some fits and spurts, it appears Manhattan’s office market might have finally recovered, five years after COVID-19.

Things looked promising last year, when office leasing hit a full-year volume of 33.3 million square feet after dropping roughly 50 percent in 2020 to 19 million square feet, and it seems the good times kept on rolling. Leasing reached 11.4 million square feet in the first quarter of 2025, the fourth consecutive increase in quarterly demand and the borough’s strongest three-month volume since the 13.2 million square feet leased in the fourth quarter of 2019, according to a Colliers (CIGI) report.

And a look at the top leases of the quarter is also something worth spending your Sunday celebrating as none came in below 300,000 square feet, with Jane Street’s nearly 1 million-square-foot expansion and renewal at Brookfield (BN)’s 250 Vesey Street leading the pack followed by the United Nations’ 425,190-square-foot renewal at 2 United Nations Plaza.

There were several other deals signed last quarter worth highlighting, including Universal Music Group’s rumored 336,000-square-foot lease at Penn 2 crossing the finish line and law firm Kirkland & Ellis expanding its New York City presence by leasing 131,000 square feet at 900 Third Avenue for a new office. 

Speaking of rumored deals getting finalized, Goodwin Procter secured 250,000 square feet at 200 Fifth Avenue, a deal that Commercial Observer reported the law firm was in negotiations for weeks ago.

And it seems like this activity won’t be limited to just the first quarter. The New York Post reported that several large tenants are currently looking to secure spaces of 350,000 square feet and above, while CO had the scoop that Apollo Global Management (APO) is in talks to take just under 100,000 square feet at 9 West 57th Street.

Everything’s coming up real estate
But the gangbusters leasing activity isn’t the only thing to give real estate cause for celebration.

There are also bidding wars and big dollars for space, with Ralph Lauren and LVMH duking it out to either buy or sign a high-priced lease for the ground-floor storefront at 109 Prince Street; PGIM Real Estate closing on a massive $3 billion capital fund for data center projects; Burlington dropping more than $257 million to acquire an Inland Empire warehouse from BlackRock; and PMG landing $215 million to build the 38 West Eleventh Residences near Downtown Miami.

Yet, nobody might be having a better week than New York Mayor Eric Adams, and that might play in real estate’s favor as well.

Adams had his federal corruption charges dropped by a judge — who also removed the ability to bring them back to life in the future — leading Hizzoner swiftly afterward to announce he had switched party affiliations and would run for re-election as an independent in the November general election.

That move could clear the field for former Gov. Andrew Cuomo to clinch the Democratic primary race in June and set up an Adams vs. Cuomo general election. Despite the two candidates having considerable baggage, it could be a win-win scenario for real estate.

Both have long been friends to the industry (and Cuomo has recently doubled down on that by apologizing to the Real Estate Board of New York for passing the Housing Stability and Tenant Protection Act of 2019) and it could knock from contention more progressive candidates like Zohran Mamdani, who has vowed to freeze rents on rent-stabilized apartments.

Now to harsh your mellow, but …
Unfortunately, it wasn’t all good news this week.

Some more buildings faced distress. Rialto Capital hit Thor Equities and Premiere Equities with a foreclosure at their 25-27 Mercer Street retail condo after they defaulted on a $10 million loan. Special servicer CW Asset Management filed a pre-foreclosure on Metro Loft Management’s 180 Water Street after it defaulted on a $265 million commercial mortgage-backed securities loan. (Metro Loft’s Nathan Berman told CO it will avoid foreclosure by settling its debts.) 

Meanwhile, that $401 million deal former boxer Floyd Mayweather Jr. reportedly made to acquire more than 1,000 units in Upper Manhattan might not be the knockout it seems, with public records not showing those properties changing hands and reports saying that Mayweather bought only a small stake in the portfolio.

Over on the West Coast, Los Angeles’ controversial “mansion tax” — which slaps a levy on high-dollar sales of most property types in the city — has led to an up to 50 percent drop in transactions above $5 million since it went into effect two years ago and created only about $632.6 million in revenue for the city, according to a study by the UCLA Lewis Center for Regional Policy Studies.

Also, the Los Angeles office market has reached its post-pandemic bottom and is expected to stay there for a while, with the city recording 3.4 million square feet of leases in the first quarter, a drop from the previous quarter, according to a Savills report.

And, while the moves in the New York City political scene could be a boon to real estate, the same might not be said about what’s happening in the White House.

President Donald Trump’s efforts to deport undocumented immigrants, an important source of labor for the construction industry, coupled with historically high inflation, have made it even harder to fill construction jobs. A 2024 study found that 92 percent of construction firms with open salaried positions are having trouble filling those roles.

“One thing that over the last 10 years that actually kept the construction workforce afloat was the increased migration that we had into the U.S.,” Gregory Kraut, co-founder and CEO of owner KPG Funds, told CO. “In one day, we had about 20 percent of our workforce disappear because of Trump’s immigration stance. There’s a whole underbelly of construction that relies on those people.”

And the construction industry was dealt another blow with Trump’s “Liberation Day” tariffs announcement, which would implement a 10 percent tariff on all imports to the United States, along with steeper tariffs on other countries, including China and those in the European Union. 

“When the tariffs took effect last month, glass prices went up 10 percent,” Eli Moyal, founder of design-build company Chapter, told CO. “Now, with the new tariffs … we could see up to a 30 percent increase in glass prices.” 

Those tariffs and the crackdown on immigration have had another effect: stopping many international tourists from wanting to visit the United States. That could have a significant impact on hotel and hospitality in New York City, the nation’s top urban tourist destination.

“It’s not good, obviously,” Vijay Dandapani, president and CEO of the Hotel Association of New York City, told CO. “As yet, we in New York City haven’t felt it in any significant way. Nothing material yet.”

Farewell, Women’s History Month
Last week saw the end of Women’s History Month, and CO marked the occasion by talking to some important women in the industry.

We sat down with Melissa Román Burch, the Forest City Ratner and Lendlease alum who is now chief operating officer for the New York City Economic Development Corporation, to talk about the Brooklyn Army Terminal and MADE Bush Terminal projects; dived into the careers of Lorie Hanson, Pharrah Jackson and Pamela LeVault, top professionals at lender Greystone; and looked at how brokerage Platinum Properties — led by Dezireh Eyn and Teresa Stephenson — has been moving beyond their Financial District roots to find success in other locales like North Brooklyn.

Enjoy your Sunday!