Crowds march through midtown Manhattan on October 16, 2025 in New York.
Spencer Platt | Getty Images
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Office rentals in Manhattan increased significantly in the fourth quarter of 2025, driven by the continued return to the office and increased hiring in the technology sector, particularly for artificial intelligence.
Rentals increased more than 25% from the third quarter to 11.87 million square feet, according to Colliers. Demand was 16% higher year over year, almost 52% above the five-year quarterly average and 43.5% above the 10-year average.
This is the island’s strongest rental quarter since the fourth quarter of 2019, Colliers found. For the full year 2025, rental volume was the highest since 2019 and just 2.4% lower than the 2019 pre-pandemic total.
“Manhattan’s strong performance in 2025 was not unexpected, but rather was a continuation of a recovery that we began to feel in 2024,” said Frank Wallach, executive managing director of research and business development in New York at Colliers.
“Demand in 2025 is a continuation of this trend, although it will be significantly accelerated by factors such as the tenant flight to quality to attract and retain talent, the implementation of the return-to-office trend, significant expansions by major tenants – such as Amazon, NYU and BlackRock – and the leasing of emerging space in the AI industry in Manhattan,” he said.
Wallach also noted an increase in demand across various sectors, including finance, technology, law, education, nonprofit medicine and government.
The supply of available office space is still much higher, up almost 37%, than it was at the start of the pandemic in March 2020, but well below the post-pandemic peak in February 2024, according to Colliers. As demand increases, the oversupply is slowly being absorbed and Manhattan is now experiencing the tightest supply since November 2020.
The tightening of supply finally contributes to increasing rents. Manhattan’s average asking rent was 1.5% higher in the fourth quarter than the previous quarter, and at $76 per square foot, it was Manhattan’s highest average since October 2020, Colliers found. For the highest tier, so-called Class A product, which is newer construction, the average asking rent increased 1.6% to $83 per square foot, Colliers said.
Class B office products are older but tend to be in good locations. We are now seeing homeowners investing in upgrades and renovations as demand increases. This helped rents in the fourth quarter increase 1.1% to a record high of $68.61 per square foot, according to Colliers.
The flight to quality continues, with 69% of all space leased in four- and five-star buildings, up from 66% in 2024, according to a separate report from CoStar. The study found that each of the 15 largest office leases signed during the year took place at four- or five-star properties. For example, Deloitte’s commitment to 800,000 square feet at 70 Hudson Yards, a prominent office building in Manhattan, was the largest lease of the year.
Overall quarterly net absorption, which measures the amount of physical space tenants actually occupy versus the amount of space they vacate, was positive by nearly 4 million square feet, according to the Colliers report. For all of 2025, it was positive 15.56 million square feet, including 2.14 million square feet of space taken off the market for planned conversion to non-business use.
“Critically, the recovery and strong demand in 2025 was also helped by the conversion of millions of square feet of buildings to non-retail uses, causing a rental wave from tenants who left these buildings,” Wallach said.
Despite the improvement in the market, the supply of offices remains much greater than before the pandemic.
“Despite increasing tenant demand and tightening supply in 2025, the Manhattan office market has lost only half of its post-pandemic oversupply. The healthy demand recorded in 2025 and conversions of underutilized office assets are therefore expected to continue in 2026 and 2027,” Wallach said.