Q3 2025 Manhattan Office Market: Class A Leasing Hits 30-Year High

Manhattan's office market has staged a remarkable recovery through 2025, with Q3 data confirming sustained momentum and Class A properties leading the charge. The vacancy rate has fallen to its lowest level in over two years, while leasing velocity approaches pre-pandemic norms.

Market Fundamentals: The Numbers

Manhattan's overall vacancy rate fell by 50 basis points to 22.0% in Q3 2025, its lowest level since April 2023. Year-to-date leasing activity has reached 30.2 million square feet through the first three quarters, with availability dropping to 15.8%, the lowest in over four years.

Combined new and renewal leasing activity totaled 29 million SF YTD, representing a 27.5% year-over-year increase. Office leasing has reached 97% of pre-COVID levels in the first half of 2025, with both Midtown and Midtown South markets having fully recovered.

Class A Dominance

Class A properties are leading the surge, accounting for 17.9 million SF of leasing through the first nine months of the year. This is the highest January-to-September total in 30 years. Trophy properties are outperforming historical norms, with leasing 36.0% higher than the pre-COVID average over the last four quarters.

Total Manhattan availability has dropped from 20% to 17.7% year-over-year, with Midtown Class A availability sitting under 12%. This flight to quality continues reshaping the market, creating a stark divide between premium and commodity space.

Submarket Performance

Midtown rents remain steady at $75.58 per square foot, while Downtown asking rents have ticked up modestly to $56.40 per square foot. Midtown South leads rent growth with a $1.75 increase to $83.06 per square foot, supported by new high-end deliveries including One High Line at 500 West 18th Street.

Average asking rents across Manhattan rose modestly to $72.81 per square foot, while Class A asking rents climbed to $81.89 per square foot.

Demand Drivers

Financial services firms account for almost 37% of major leases signed in the first half of 2025, driving significant absorption in Midtown. Tech companies that went remote in 2020 are quietly taking floors again, and media firms are consolidating into better spaces rather than shrinking.

Return-to-office momentum continues building. Recent reports from REBNY suggest mid-week office attendance has been trending solidly in the 72-75% range, with Class A+ buildings closer to 85%.

Sublease Market Tightening

Sublease availability declined for the fifth straight quarter to just under 15 million SF, nearly 7 million SF below year-ago levels. Net office absorption was a robust 7.5 million SF in the first half of 2025, the strongest first-half result in over a decade.

This absorption of sublease space indicates genuine occupancy gains, not just musical chairs among existing tenants.

Market Bifurcation Persists

The vacancy gap continues widening. Trophy Class A vacancy rates could finally drop below 10% by year-end, yet Class B and C landlords may face vacancy rates above 20%.

This bifurcation creates distinct strategies: trophy asset owners can focus on tenant retention and modest rent growth, while commodity landlords must consider significant capital investment or alternative use conversion.

Looking Into 2026

Several factors support continued momentum. Major lease expirations through 2026 will drive activity as tenants make long-deferred decisions. The stabilization of interest rates should eventually support investment activity and selective new development.

The conversion of obsolete office buildings to residential use continues, with over 10 million SF in the pipeline. This supply reduction, combined with limited new construction, supports gradual vacancy compression in quality segments.

Strategic Implications

For tenants: The window for aggressive concession packages may be closing in Class A markets. Companies with 2026-2027 expirations should begin exploring options now while landlord flexibility remains.

For landlords: Quality assets command premium pricing and tenant interest. Commodity assets require realistic repositioning strategies or conversion analysis. The middle ground is increasingly difficult to occupy.

For investors: Trophy assets justify premium pricing given leasing momentum. Value-add opportunities exist in well-located Class B assets suitable for repositioning, but require significant capital and realistic timelines.

Conclusion

The Q3 2025 data confirms Manhattan's office market recovery is real and accelerating. Class A leasing at 30-year highs, vacancy at multi-year lows, and sustained absorption signal structural demand returning.

The market that emerges differs from 2019: more efficient, more amenity-focused, and more bifurcated, but fundamentally healthy. Understanding these dynamics and positioning accordingly will determine success for all market participants.

Data sources: Cushman & Wakefield Q3 2025 Manhattan Office Report, JLL Research, REBNY Market Analysis.