Manhattan Office Leasing Snapped Back To Reality In Q1

After a gangbusters start to the year, Manhattan’s office market snapped back to reality in the second quarter.

Office leasing volume reached 9.2 million square feet, an 18.9 percent drop from the previous quarter, according to a new report from Colliers. But thanks to a banner first quarter — during which six tenants inked deals for more than 250,000 square feet — the borough had its strongest first half of the year in more than a decade. Tenants signed deals for 20.7 million square feet in the first six months of 2025, according to Colliers, the most since 2014.

“The Manhattan office market is still moving at a very healthy clip,” said Franklin Wallach, one of the report’s authors. “We weren’t surprised to see a modest dropoff from Q1 to Q2 because Q1 was a level of demand that was going to be very hard to repeat.”

The largest lease of the second quarter was NYU’s massive deal at 770 Broadway. The university inked a 1.1 million-square-foot masterlease at Vornado Realty Trust’s Greenwich Village office building, marking the largest new lease since 2019.

Amazon’s 330,000-square-foot lease at Property & Building Corp’s 10 Bryant Park was the second-largest lease. Law firm Goodwin Procter inked the third-largest lease for 244,000 square feet at BXP’s 200 Fifth Avenue.

Although there were fewer large deals, demand still outpaced supply. The availability rate tightened for the fifth consecutive quarter in the second quarter, dropping from 17.7 percent last quarter to 15.4 percent this quarter. Available supply dropped to about 82 million square feet from a post-pandemic peak of 98 million square feet in February 2024, according to Colliers.

Sublet supply, a good indicator of the market’s health, dropped by more than 30 percent over the last year, but remains two-thirds higher than it was in March 2020. Midtown South ended the quarter with a pre-pandemic level of sublet supply, although overall availability is still nearly double that of March 2020.

“Midtown South won the race to be the first Manhattan market to shave off the excess sublet supply that came on the market post-pandemic,” Wallach said. “But there’s still quite a bit of excess direct space.”

Asking rent decreased by 1 percent in the second quarter to about $74 per square foot, due to several expensive blocks of space coming off the market.

“Even if supply tightens, if the priciest space is what comes off the market, you can have tighter availability but a drop in pricing,” Wallach said. “That’s what happened in pockets of the market this quarter.”