The Manhattan office market came back from an early slowdown to reach a solid quarter of growth.
Firms inked leases for about 11.8 million square feet of Manhattan office space in the first quarter of 2026, according to a new report from Colliers. That’s a slight decline from the end of 2025, but still a 3.4 percent growth year over year and the strongest first quarter since 2014, according to the report. Average asking rent grew 2 percent quarter over quarter and 4 percent year over year to $77.55 per square foot.
It’s a recovery for the market after a slower January and February, thanks mostly to a particularly large lease renewal near Bryant Park. But despite the rally, it will be difficult for 2026 to rival 2025’s hot streak, marked by 15 million square feet of positive absorption, said Franklin Wallach, executive managing director of research at Colliers.
“There were a lot of people that looked at this sort of amazing milestone that was achieved in ‘25 and said, ‘Wow, can the market do it again in 26?’” he said. “To achieve another year of 15 million square feet of positive absorption is a difficult benchmark, to say the least.”
More than one-fifth of the quarter’s leasing volume was driven by its largest lease, Bank of America’s 2.4 million-square-foot renewal at 1 Bryant Park. Without that, leasing volume would have come in closer to 9 million square feet, a more significant drop from the end of 2025. Leasing volume typically declines slightly from the first quarter to the second quarter, as it did this year, Wallach said, as companies push to get big deals signed by the holiday season.
The availability rate tightened to 13.7 percent, according to the report, down 2.4 percentage points year over year. The number marks two years of quarterly tightening or stabilizing.
Midtown demand grew significantly, driven by the Bank of America lease. The area captured 57 percent of the borough’s leasing activity. Asking rents in the district, defined as above 40th Street and below 59th, grew to $84.74 per square foot.
Other major leases in the neighborhood include the borough’s second largest: law firm Gibson, Dunn & Crutcher’s 361,600-square-foot renewal at 200 Park Avenue.
Leasing volume in Midtown South, defined by Colliers as 40th Street to Canal Street, fell more than 10 percent quarter over quarter. The district accounted for about 34 percent of the total Manhattan leasing volume. However, availability tightened and asking rent grew over the quarter as well as over the year. Asking rent in the district has reached $80.27 per square foot. The biggest lease in the district was the borough’s third-largest, Ramp’s 285,300 square foot lease at 28-40 West 23rd Street in Flatiron.
AI-related companies specifically leased more than 600,000 square feet, Wallach said. That surpasses all of the AI leases signed in 2024 and puts the year on track to surpass 2025 as well. The largest AI-related lease was Clay’s deal for 163,000 square feet at 11 Madison Avenue, also in Flatiron.
“The tech sector has always naturally gravitated towards Midtown South, but not exclusively,” Wallach said, noting major leases in Midtown and Downtown as well.
Downtown’s leasing velocity fell by about half from the previous quarter. Asking rents grew from previous quarters but were still significantly lower, at $61.70, than uptown districts.
Office-to-residential conversions continue to support the tightening of the overall Manhattan market, Wallach said. In the past five years, about 10 million square feet of office space has been removed from the market. The tower at 750 Third Avenue, for example, removed about 750,000 rentable square feet from the market.
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