Manhattan’s office market is showing its strongest signs of recovery in years, marking a shift many in commercial real estate have been waiting for, according to a new report from Colliers.
In the second quarter, office availability across Manhattan reached its lowest point since January 2021, Colliers researchers Aaron Jodka and Brennan Yerman found. Sublet space has been shrinking, Midtown South is the first submarket to dip below pre-pandemic levels, and tenants are pushing harder than ever toward newer, higher-quality buildings.
The demand for prime space is especially pronounced. Offices built since 2000 reported an availability rate of just 8.5% in the second quarter, down from 12.9% a year earlier. That figure was not only the lowest of any building type but also reflected the broader trend that newer, higher-quality properties are capturing the lion’s share of leasing demand. By contrast, availability in pre-war buildings stood at 17.5%, nearly double the level of modern offices. Availability in post-war buildings was 14.5%, and post-1980 construction came in at 17.1%.
Overall, Manhattan’s available office inventory has fallen nearly 17% from its post-pandemic peak in February 2024, declining to 81.98 million square feet. While that total remains more than 50% higher than it was at the start of 2020, it points to a market gradually tightening.
Two forces are driving the shift. One is scarcity, led most notably by the sharp decline in sublet space. Since peaking in March 2023, sublet availability has tumbled by 37.2%, from 22.12 million square feet to 13.89 million, reaching its lowest point since July 2020, according to Colliers. Midtown South is at the forefront of the recovery, with supply in the submarket falling 14.1% to 3.66 million square feet, the first area in Manhattan to drop back to pre-pandemic levels.
The second driver is demand. Leasing activity in the first half of 2025 totaled 20.63 million square feet, setting up the possibility of crossing the 40 million-square-foot mark by year’s end. That threshold, if met, would represent the market’s first such year since the pandemic began. The first quarter was particularly strong, with 11.39 million square feet of leases signed—the busiest first three months a year since 2014.
Rents are also nudging upward, though more subtly. Colliers noted that while repricing is strengthening for direct space, concessions are starting to ease. From 2023 to 2024, average tenant allowances and free rent increased just 0.1%. So far this year, however, new deal concession packages are down 11.1% from the same period in 2024.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.