Economy: Office-Using Employment Reaches Highest Level In Five Months
New York City employment increased by 14,100 jobs in Q2 2026, bringing total employment to nearly 4.9 million positions through May. Private sector hiring accounted for the majority of gains, with employment rising by 46,800 jobs during the quarter. Leisure and hospitality surged by 16,200 jobs to reach its highest level since November 2025, while education & health services fell by a modest 1,500 positions. Office-using employment rose by 10,600 jobs to a five-month high of 1.54 million positions—supported by continued strength in professional business services, which added 11,300 jobs and financial services, which gained 1,200 positions. Although Information services shed 1,900 jobs during the quarter, employment remained 2,500 jobs above the level of one year ago.
Supply And Demand: Leasing Remains Elevated Despite A Modest Decline In Second-Quarter Activity
Following an exceptionally strong first quarter that generated 9.5 million square feet (msf) of new leasing activity, Manhattan posted another robust quarter, recording 8.2 msf of leasing volume—well above the 2025 quarterly average of 7.7 msf. The strong performance brought the year-to-date (YTD) total to 17.7 msf, a 12.6% increase over the same period in 2025 and significantly outpacing the historical mid-year average. Combined new and renewal leasing climbed by 14.9% over the past 12 months to 23.5 msf, driven by a 22.9% year-over-year (YOY) increase in lease renewals—marking the strongest first-half year total on record. While the number of leases greater than 100,000 square feet (sf) remained unchanged from the first half of 2025 at 24, the total square footage leased increased by 24.7%, rising from 7.7 msf to 9.7 msf. Class A space continued to account for the majority of leasing, capturing 77.5% of total new and renewal demand—a modest decline from 80.9% at the same point in 2025. The continued tightening of Class A supply has prompted tenants to increasingly consider high-quality Class B space as a viable alternative, contributing to an increase in the Class B share from 14.7% to 16.6%—an uptick also driven in part by growing AI-related leasing activity.
As a result of the sustained leasing momentum, Manhattan's overall vacancy rate declined by 60 basis points (bps) during the quarter to 19.3%—the lowest quarterly total since Q3 2021. Sublease supply fell by 5.1% during the quarter to 12.1 msf, the lowest quarterly rate since Q2 2020. Direct vacant space declined to 16-quarter low of 67.9 msf, driven by strong leasing activity along with the removal of several buildings slated for residential conversion. Overall YTD absorption remained positive for the fourth consecutive quarter, totaling 2.4 msf. Class A properties recorded nearly 2.9 msf of positive absorption, offsetting Class B and C occupancy losses.
Pricing: Class A Asking Rents Increase Throughout Manhattan
Manhattan overall asking rents dipped by $0.29 to $72.83 per square foot (psf) in Q2 2026 while Class A asking rents increased by $1.54 to $84.79 psf. Midtown overall asking rents remained stable at $76.98 psf, as Class A rents climbed by $1.93 to $88.50 psf, due to premium space additions at 277 Park Avenue. Midtown South overall asking rents increased by $0.20 to $81.14 psf, while Class A rents rose modestly by $0.12 to $104.50 psf. Downtown overall rents held steady during the quarter at $56.66 psf, while Class A rents rose by $1.82 psf to $63.60 psf, led by pricing sublease additions at Four World Trade Center.
Midtown
Midtown new leasing in Q2 2026 rose by 15.0% to 5.0 msf, fueled by four leases each greater than 100,000 square feet (sf)—the largest being Simpson Thacher & Bartlett's 916,000-sf pre-lease to anchor 570 Fifth Avenue. Despite the quarter's stronger performance, YTD new leasing remained 10.5% below the same period in 2025, with 9.4 msf transacted. Class A properties continued to capture the majority of demand, accounting for 7.8 msf, or 82.6% of YTD activity. Financial Services remained the leader of demand, representing 37.5% of new leases greater than 10,000 signed YTD—followed by the TAMI sector (Technology, Advertising, Media and Information Services) at 23.4% and legal services at 23.0%. Combined new and renewal leasing totaled 13.5 msf through midyear, slightly below the 13.6 msf recorded in the first half of 2025. The overall Midtown vacancy rate fell by 60 bps to a 21-quarter low of 17.7%, supported by the removal of several office buildings for residential conversion—notably including 135 East 57th Street and 845 Third Avenue, both of which contributed to a significant portion of vacant space on the market. All nine submarkets posted YOY vacancy declines, with six reporting vacancy rates below 20.0%. Overall YTD absorption remained positive for the fourth consecutive quarter at 1.7 msf.
Midtown South
Midtown South new leasing declined by 6.9% quarter-over-quarter to 2.1 msf, though it remained well above the 1.6-msf quarterly average in 2025. YTD new leasing reached 4.3 msf, up 21.5% from 3.5 msf during the same period in 2025. Class B leasing accounted for the largest share of activity at 42.0%, slightly outpacing Class A leasing at 40.8%. The TAMI sector continued to drive demand, representing 61.4% of new leases 10,000 sf and greater—up sharply from a 25.2% share in the first half of 2025. Growing demand from the AI sector was a key contributor to the uptick in TAMI leasing. Lease renewals climbed to a six-quarter high of 521,061 sf, led by Google's 410,556-sf renewal at 315 Hudson Street—the largest renewal completed in Manhattan during the quarter. The uptick in renewal activity brought the combined new and renewal YTD total to 5.0 msf—up 20.7% YOY from 4.2 msf. Midtown South vacancy fell for the seventh straight quarter to 21.8%, down from 25.1% one year ago, with all five submarkets posting lower or stable vacancy rates. Overall YTD absorption stayed positive at 1.0 msf.
Downtown
Downtown recorded 1.1 msf of new leasing during the quarter, bringing the YTD sum to 4.0 msf—a 137.8% increase from the 1.7 msf transacted during the same period in 2025 and the highest midyear total since 2019. Class A demand drove the majority of activity, accounting for 87.3% of YTD new leasing. Financial services drove 63.0% of YTD new leasing activity for new leases 10,000 sf and greater, followed by legal services at 14.7%. Combined new and renewal YTD leasing increased by 82.8% YOY to 4.9 msf, with Class A leasing accounting for 88.0% of the YTD total. The World Trade Center submarket captured 65.5% of YTD new and renewal leasing. While direct vacant space edged up during the quarter to 14.8 msf, sublease space fell to 3.5 msf—the lowest quarterly total since Q2 2020. YTD absorption was slightly negative at 363,687 sf, as new space additions during the quarter outpaced occupancy gains.
