Office Leasing Surges in Manhattan on AI Demand

Leasing Velocity Remains Strong

According to NYREJ, Manhattan office leasing entered 2026 with strong momentum, matching last year’s pace. JLL reported that activity remained near prior highs. Large deals drove much of the volume. American Express signed a major lease at 2 World Trade Center. At the same time, AI demand surged across the market. Together, these factors produced nearly 9M SF in new leases. That total fell just short of the 9.1M SF recorded a year earlier.

AI Drives Market Shifts

AI firms leased 415K SF of Manhattan office space in Q1 2026, doubling last year’s pace. Larger deals now average 34,500 SF, showing rapid expansion and demand for contiguous space. AI tenants continue to secure top-tier locations across the city. Nscale Global Holdings set a record with $320 PSF at One Vanderbilt. This surge mirrors broader momentum seen in recent office leasing recoveries across Manhattan.

Vacancy Shrinks, Rents Rise

Vacancy dropped 60 basis points during the quarter, settling at 13.5% as demand held strong amid limited new supply. Rents climbed more than $1 PSF over the quarter, reflecting robust competition among tenants, especially for class A buildings. Broad industry presence continues to underpin recovery, and conversations around alternative locations remain, though Manhattan retains its hold on major occupiers, per JLL.

What’s Ahead

Despite persistent economic uncertainty, Manhattan’s office leasing market remains highly active, especially in tech and AI segments. While some occupiers are evaluating options outside Manhattan for cost reasons, current trends suggest sustained demand for top-tier Midtown and Downtown assets through 2026.