“Q2 was one of the strongest quarters we’ve seen for leasing activity, and not just while looking at the last five years of post-COVID recovery. Class A office space accounted for nearly 7 million square feet of new leasing during the quarter, marking the highest quarterly total for Class A properties since Q2 2011,” said Lori Albert, Tri-State Research Director at Cushman & Wakefield. “Overall, Manhattan is on pace to have its strongest leasing year since 2019. We also anticipate continued upward pressure on rents for high-quality spaces as availability declines and large block options become increasingly limited. We believe that the surge in leasing is also setting the stage for more new construction starts to meet future demand."
The quarter's leasing activity was bolstered by six new leases exceeding 100,000 square feet, including New York University's commitment at 770 Broadway, which accounted for 1.1 msf, the largest lease of the quarter. Renewal activity also gained momentum, with 4.7 msf of lease renewals YTD, a 47.2% increase compared to Q2 2024. This brought total combined new and renewal leasing activity to 20.4 msf YTD, representing a 40.3% YOY growth.
Manhattan’s overall vacancy rate declined for the fourth consecutive quarter to 22.6%, driven primarily by a reduction in sublease supply, which fell to 16.8 msf, reaching its lowest level since Q3 2020. Asking rents across Manhattan averaged $72.61 per square foot during the quarter, with Class A rents increasing to $81.67 per square foot, reflecting growing demand for premium spaces. Midtown South led the charge in rent growth, with asking rents climbing by $2.71 to $81.31 per square foot, attributed in part to the delivery of 261 Eleventh Avenue (Terminal Warehouse).
The sustained demand for office space underscores a revitalized Manhattan office market, buoyed by sectors such as finance and professional services. Financial services tenants alone accounted for 36.8% of leases exceeding 10,000 square feet YTD, compared to 29.6% during the same period last year.