- Manhattan office leasing reached 25.7M SF through Q3, up 2.3%, while vacancy fell to 12.6% from 14.7% a year earlier, per JLL, and direct asking rents rose to $84.56.
- Tenants are widening the map, splitting workforces across buildings and moving from Park Avenue to Third Avenue, as trophy vacancy of 4.9% limits their options.
- Strength is not uniform: buildings without amenities or capital for upgrades struggle, and investors still need to evaluate each building’s tenants, rollover and capital needs.
Manhattan’s office comeback began with trophy buildings, but tighter availability and climbing rents are now steering tenants toward a broader mix of buildings and locations, according to Institutional Real Estate, Inc. (IREI).
JLL brokers told IREI the shift reflects a wider recovery rather than a stopgap while premium space is scarce.
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Leasing and Rents
JLL data cited by IREI puts Manhattan leasing at 25.7M SF through the third quarter, a 2.3% gain on 2025’s pace. Total vacancy dropped to 12.6% from 14.7% a year ago, and net absorption so far this year totals almost 4.9M SF.
Direct asking rents climbed to $84.56 per SF, rising across building classes, per JLL.
Tenants Widen the Map
David Giancola, who leads capital markets at JLL New York as a senior managing director, told IREI that tenants are casting a wider net out of necessity, though some also find appealing alternatives.
JLL tenant rep Evan Margolin, a vice chairman, told IREI the nature of client conversations is shifting, with companies weighing buildings they would have skipped not long ago. He cited a hedge fund client now on Third Avenue after 20-plus years on Park.
Some companies are also splitting up. Margolin told IREI that a tenant holding a cheap lease with years left, but no room to grow, may rent nearby space rather than abandon the deal and relocate everyone. Quality expectations are unchanged, he said, since tenants still want amenities and an owner who keeps spending on the building.
Lexington and Third Gain Ground
As trophy vacancy shrinks to 4.9%, Lexington and Third avenues are picking up demand, IREI reported. JLL counts show Lexington lease activity growing about 28.6% a year from 2021 to 2025, compared with 18.4% on Third.
Third is on track to beat its 2025 leasing total this year, per JLL.
Not a Uniform Recovery
Margolin told IREI that a divide remains between buildings that compete and those that don’t, with properties lacking amenities or capital for upgrades and tenant allowances still struggling.
JLL’s third-quarter figures show the spread by submarket: 7% vacancy in Hudson Yards, 7.3% at the World Trade Center, 9.7% in the Midtown Core and 16.9% in Midtown East.
Why It Matters
Giancola told IREI that leasing usually signals the direction of the investment market before values catch up, but it doesn’t resolve every valuation question. Buyers still have to size up a building’s tenants, rollover, capital needs and standing against rivals, he said.
Stronger leasing also helps lenders, Giancola told IREI, because they can underwrite actual leasing results instead of guessing at demand, though credit remains selective. As we covered, Manhattan office vacancy fell to 12.6%, the lowest since before 2020.
What’s Next
Giancola told IREI the pool of investable offices could grow beyond a handful of trophy towers, though each deal will still be judged one building at a time. Nationally, we covered JLL’s view that shrinking inventory could last more than three years, keeping trophy rents under pressure.
