Economy: Office-Using Employment Hits Record High in July Before August Pullback
New York City employment increased by 8,100 jobs between June and August 2026, bringing total employment to 4.86 million positions—56,400 jobs above its year-ago level. Office-using employment reached a 17-month high of 1.56 million jobs in July before declining by 24,800 positions in August, reflecting a gain of 1,300 jobs over the past 12 months. Professional and business services shed 18,000 jobs in Q3 2026, while information services lost 4,000 jobs and financial activities declined by 2,300 positions. Leisure and hospitality employment, which steadily increased in the first half of the year, fell by 18,100 jobs in Q3 2026.
Supply and Demand: Vacancy Falls to Lowest Level Since 2021
Manhattan recorded 6.2 million square feet (msf) of new leasing in Q3 2026, down 23.8% quarter-over-quarter (QOQ) but remaining 3.5% above the prior three-year quarterly average of 6.0 msf. Despite the quarterly drop in leasing, year-to-date (YTD) activity accelerated by 4.2% from the same period in 2025 to 23.9 msf. Class A space captured 74.3% of YTD new leasing, down from 77.8% a year ago, while the Class B share increased from 16.0% to 19.4%. AI-related office leasing helped drive demand growth, with the YTD total reaching 2.8 msf—nearly triple the full-year 2025 level and surpassing every prior full-year total. Despite the boost in AI leasing, it accounted for only 11.7% of total new leasing. Renewal activity surged, climbing 37.9% from the prior quarter to 2.9 msf, lifting YTD renewals up 44.5% YOY to 8.7 msf. Combined new and renewal YTD leasing totaled 32.6 msf, 12.5% ahead of last year’s pace and the strongest January-to-September total on record. Six leases greater than 200,000 square feet (sf), totaling 1.3 msf, were transacted during the quarter, bringing the YTD total to 16 leases totaling 9.4 msf—up from 6.7 msf during the same period in 2025.
Manhattan’s overall vacancy rate decreased by 70 basis points (bps) during the quarter to 18.6%, the lowest level since Q2 2021 and the ninth consecutive quarterly decline. Sublease supply fell 12.1% to 10.6 msf, the lowest level since Q3 2019, while direct vacant space declined to 66.0 msf—the lowest since Q1 2022. Overall absorption was positive for the fifth consecutive quarter, bringing YTD absorption to 5.4 msf. Class A properties recorded 5.1 msf of YTD absorption, while Class B and Class C properties both moved into positive territory on a YTD basis in the third quarter.
Pricing: Asking Rents Rise Throughout Manhattan as Class A Reaches Record High
Manhattan overall asking rents increased by $1.53 per square foot (psf) during the quarter to $74.37 psf, the highest level since May 2019, while Class A asking rents climbed $1.96 to a record $86.74 psf, 5.9% above a year ago. Midtown overall asking rents rose by $1.85 psf to $78.83, as Class A rents increased by $2.07 to $90.57 psf, the highest level since 2008. Midtown South overall asking rents increased by $1.00 psf to $82.14, while Class A rents climbed $2.13 psf to a record $106.62. Downtown overall rents rose by $1.43 psf to $58.09, while Class A rents increased by $2.37 to $65.96 psf, the highest level since mid-2020.
Midtown
Midtown new leasing declined by 22.0% during the quarter to 3.9 msf, 17.8% below Q3 2025, with YTD new leasing at 13.4 msf—trailing last year’s pace by 12.8%. Class A properties accounted for 85.0% of quarterly new leasing and 83.3% of YTD activity. Legal Services led YTD demand, representing 32.7% of new leases greater than 10,000 sf, followed by Financial Services, accounting for 30.1% of activity. The largest new deals were Morgan Lewis’s 210,000-sf transaction at 1251 Avenue of the Americas and Snap’s 198,893-sf sublease at Penn 2. Renewals nearly doubled to 2.1 msf, led by Proskauer Rose LLP’s 447,698-sf renewal at 11 Times Square, lifting combined new and renewal YTD leasing to 19.6 msf—1.1% above 2025. The overall vacancy rate fell by 70 bps to 17.0%, the lowest since Q1 2021. All nine submarkets posted YOY declines, with six currently below 20.0% vacancy. YTD absorption remained positive at 3.6 msf, with Class A properties accounting for 3.5 msf.
Midtown South
Midtown South new leasing declined by 12.9% quarter-over-quarter to 1.8 msf but was 29.7% above Q3 2025 and exceeded the 2025 quarterly average of 1.6 msf. YTD new leasing reached 6.1 msf, up 23.8% YOY. Class A accounted for 44.9% of YTD new leasing, with Class B accounting for 39.5%. The TAMI sector (Technology, Advertising, Media & Information Services) represented 65.9% of new leases of 10,000 sf and greater signed during the quarter, with Anthropic’s 465,630-sf lease at 330 Hudson Street representing the largest new lease in Manhattan during the quarter. Lease renewals rose 16.5% to 607,000 sf, bringing combined new and renewal YTD leasing to 7.4 msf—up 31.5% YOY. Vacancy declined for the eighth consecutive quarter to 21.5%, down from 24.9% one year ago and the lowest level since Q2 2022, though Hudson Square/West Village was the only submarket to post a YOY increase. Overall YTD absorption was positive at 1.4 msf.
Downtown
Downtown recorded 514,706 sf of new leasing during the quarter, a 52.6% decline from the second quarter, bringing YTD new leasing to 4.5 msf—up 63.2% YOY and the highest nine-month total since 2019. Class A space drove 87.0% of YTD new leasing with the World Trade submarket capturing 69.7% of YTD volume. Financial Services led new leases of 10,000 sf and greater, representing 58.5% of activity, followed by Legal Services at 16.3%. Combined new and renewal YTD leasing rose 41.7% YOY to 5.6 msf, supported by AON’s 202,000-sf renewal at One Liberty Plaza. Overall vacancy fell by 130 bps to a 20-quarter low of 21.0%, as sublease space declined 22.8% to 2.7 msf, the lowest level since Q1 2020, while direct vacant space dropped 3.5% to 14.3 msf. YTD absorption turned positive at 460,609 sf, reversing last quarter’s 363,687 sf of negative absorption.
