Manhattan’s Office Leasing Reaches Velocity Not Seen Since 2002: Report

Manhattan’s office leasing in the first half of 2026 was one for the books.

The past two quarters counted just under 23 million square feet of office leases, according to Colliers’ second-quarter office report, in what the brokerage called the strongest first-half period of leasing velocity since 2002.

“You really saw recovery show itself in multiple ways,” Franklin Wallach, Colliers’ executive managing director for research and business, told Commercial Observer, “On the demand side, the supply side, the pricing.” 

The results are music to New York City office landlords’ ears. Demand outpaced tightening supply, law firms and tech gobbled up space, and average asking rents sharply increased. 

Leasing volume during the second quarter totaled 11.02 million square feet, with a positive net absorption of 3.51 million square feet. That leasing activity was led by law firm Simpson Thacher & Bartlett’s 916,000-square-foot lease at Extell Development’s office development at 570 Fifth Avenue in May. 

Manhattan’s law firms, with their insatiable appetite for office, occupied five of the top 10 largest lease deals in the quarter, according to Wallach. Those heavyweights included Cleary Gottlieb Steen & Hamilton’s 475,000-square-foot deal at One Liberty Plaza and Alston & Bird’s 169,664-square-foot lease at 51 West 52nd Street.

Average office asking rents increased to $78.03 per square foot, up 5.7 percent annually. According to Colliers, that’s the sharpest midyear annual growth since 2016. While the city at large is still working its way back to pre-pandemic standards, asking rent along high-demand corridors like Midtown’s Park Avenue have 2020 in the rearview mirror. Average rents along the avenue jumped 4.6 percent over the quarter, to $119.62 per square foot, in a nearly 14 percent increase from March 2020. 

Manhattan’s Class A office market commanded $92.19 per square foot last quarter, according to Savills’ second-quarter report, with an overall availability rate of 13 percent. Hudson Yards was the priciest submarket, asking an average of $153 per square foot. 

The period’s 11.02 million square feet of activity didn’t quite measure up to the 11.78 million square feet of leasing in the first three months of 2026, fueled largely by Bank of America’s 2.4 million-square-foot mega-deal at One Bryant Park. Still, the second-quarter momentum was well above Manhattan’s 10-year quarterly average.

“If the second half of the year is simply a mirror image of what we saw during the first half, we would have the highest yearly leasing total since 2000,” Wallach said. 

Thanks to law firms, professional services led the quarter with a 30 percent share of activity, but the technology sector continued to live up to the hype. The 800,000 square feet of artificial intelligence leases in the second quarter surpassed the total yearly demand of 2025. 

Health care tech platform Tennr led the AI-powered pack with a 124,733-square-foot deal at 345 Hudson Street, while Google’s 410,556-square-foot renewal at nearby 315 Hudson Street led the technology, advertising, media and information (TAMI) sectors overall.

In the face of fierce demand, Manhattan office’s availability rate — a measure of space that is vacant or soon to become vacant — contracted over the quarter to 13 percent. Availability in Midtown, in particular, is only 3 percent higher than it was in March 2020, according to Colliers. Availability rates also decreased in Midtown, Midtown South and Lower Manhattan, but their relative positions in the city’s recovery vary.

With 68 million square feet of available office supply, Manhattan availability remains elevated well above March 2020 figures, but is more than 30 percent recovered since 2024 peaks. Sublease supply has notably dipped below that all-consuming March 2020 benchmark. 

“This quarter had milestones that were a decade, if not decades, in the making,” Wallach said. “That was certainly one of those ‘wow’ moments as we were looking through the data and putting together the analysis.”

Emily Davis can be reached at edavis@commercialobserver.com.