After finishing last year on a high note, the Manhattan office market came out the gate even hotter in 2025.
Office leasing volume reached 12.2 million square feet in the first quarter, the most since the fourth quarter of 2019, when the borough logged 12.7 million square feet, according to a new report from Savills. The leasing boom comes as work-in-office rates reach 76 percent of pre-pandemic levels, with one in four employers planning to further increase office attendance, according to The Partnership for New York City.
“Manhattan, in general, is in a class of its own right now as far as major U.S. office markets,” said Savills’ Matthew Schreck, a co-author of the report. “We’ve had three to four straight quarters of continually accelerating demand. The reason is due in part to the tenant mix that exists in this market… and their attitude towards work on-site.”
The market was boosted by a wave of large leases, including 16 deals for 100,000 square feet or more.
The largest lease of the quarter, according to Savills, was Jane Street Capital’s 400,000-square-foot expansion at Brookfield’s 250 Vesey Street, which increased the firm’s footprint to nearly 1 million square feet. Eight of the ten largest leases were renewals, some including expansion components.
The second-largest lease was Horizon Media Group’s 367,000-square-foot renewal at Hudson Square Properties’ 75 Varick Street. Universal Music Group’s 334,000-square-foot lease to relocate to Vornado’s Penn 2 office tower, came in third.
Availability continued to tighten, especially in Class A buildings. The overall availability rate was 17.7 percent, down from 20 percent a year ago. Availability at the highest-end buildings, classified as trophy and Class A+, dipped below 12 percent across Manhattan and fell to 7.5 percent in Midtown.
“You can see the run on this type of space, and the construction pipeline is limited,” Schreck said. “There are a few projects due to be completed either this year or next and then there’s a bit of a gap…. In that interim basis, there is going to be a supply side pinch.”
The center of Manhattan was in especially high demand, seeing lower availability rates than the overall 17.7 percent average. Hudson Yards’ availability was 9%, Union Square’s was 11.2 percent while Grand Central’s vacancy rate was 13.9 percent.
While overall asking rent, which includes direct and sublet space, is down 2.1 percent year over year, class A rents ticked slightly higher with an increase of 0.5 percent. Values surged in prime office corridors. The average asking rent for upper floors in trophy buildings in Hudson Yards and the Plaza District hit nearly $160 per square foot; a few deals fetched $200 per square foot and up.
“The types of companies that are leasing those types of spaces are a lot of financial services firms, especially private equity and hedge funds, large law firms and large multinational-type companies,” Schreck said.
The real estate, financial services and law sectors are leading the return-to-office push, according to The Partnership for New York City, which surveyed more than 125 employers on office attendance. As of mid-March, 57 percent of Manhattan office workers are in the office on a typical weekday, the study found.
Office attendance rates for real estate firms have reached 85 percent and 62 percent for financial services and law firms.
While 75 percent of employers say their current policy is the “new normal,” the remaining 25 percent plan to increase office attendance over the next 12 months, the study found.
The story was updated to reflect a change Savills made after publication to its largest three leases.
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