- New Class B and C office leasing in Manhattan hit roughly 7 million square feet in the first half of 2026, surpassing every comparable period since 2015, per CoStar.
- Owners including Empire State Realty Trust, Feil Organization, and Kaufman Organization are adding roof decks, conference centers, and event space to buildings that once competed mainly on price.
- The shift reflects a broader flight-to-quality dynamic spilling down-market, as tenants prioritize amenitized, well-run buildings over class labels tied strictly to rent.
Manhattan Class B and C office space is absorbing tenants at a pace not seen in years, and owners are racing to add Class A-style amenities to keep them, according to Commercial Observer. New leasing in those buildings reached roughly 7 million square feet in the first half of 2026, according to CoStar, outpacing every comparable stretch since 2015. That demand comes with a catch: tenants increasingly expect the roof decks, event spaces, and conference centers once reserved for trophy towers.
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How It Started
Class A leasing in Manhattan slipped to 10.3 million square feet in the first half of 2026, down from 11.6 million square feet a year earlier, per CoStar. Class B and C space picked up the slack, aided by less Class A availability and rising Class A rents.
CoStar noted that Class B and C buildings made up roughly 40% of new leasing activity in the first half of 2026, up from 31% last year and back near the pre-pandemic average of 39%. The firm concluded that “the city’s office recovery is no longer limited to trophy or top-tier buildings.”
The Details
Cushman & Wakefield’s second-quarter 2026 report placed Class A asking rents at $88.50 per square foot in Midtown and $104.50 in Midtown South. By comparison, Empire State Realty Trust signed Jencap Group for 19,883 square feet at 1350 Broadway in October 2025 and Steve Madden for 60,000 square feet at 501 Seventh Avenue in April 2026, both in the low $60s per square foot.
ESRT leans on scale to fund amenities across its seven-building, 6-million-square-foot Midtown portfolio, including a 130-person conference center at 1400 Broadway and a 250-person rooftop at 1333 Broadway. Smaller owners are finding creative workarounds instead: Feil Organization is building a 14,000-square-foot roof deck at its 357,000-square-foot 7 Penn Plaza, and Kaufman Organization built a roughly $300-per-square-foot amenity center in the basement of 875 Sixth Avenue, known as One NoMad.
Zooming Out
Terraces and “town hall”-style meeting space are now the amenities most in demand, while office gyms have become less of a priority, owners and brokers told Commercial Observer. Williams Equities principal Michael Cohen described a “sea change” in Class B amenity strategy over the past decade, driven partly by employers trying to lure workers back from home.
The trend tracks with broader momentum in the borough, where office leasing has strengthened enough to push rents higher even outside the trophy tier.
Why It Matters
The amenities race signals that the flight-to-quality dynamic that has defined Manhattan’s Class A recovery is spilling into the Class B market, forcing smaller, often individually owned buildings to compete on experience rather than price alone. Newmark’s David Falk called outdoor space and roof decks “game-changers” for leasing at older buildings.
That pressure builds on a recovery CRE Daily has tracked as office leasing activity has climbed across Manhattan more broadly, with amenitized, well-capitalized owners best positioned to capture it.
What’s Next
Expect more Class B owners to convert underused space, such as basements and single-tenant terraces regained at lease expiration, into shared amenities rather than adding new square footage. Feil Organization plans to reclaim a terrace at 841-853 Broadway and add a conference center at 488 Madison Avenue as space comes back to it over the next two years.
Owners that can’t compete on amenities, like GFP Real Estate’s sub-200,000-square-foot buildings, are betting on tenant perks and service instead, a split that will likely define how the Class B market segments further as the trend plays out.
Not every owner is convinced amenities decide leases. Adams & Company’s Jeff Buslik, whose portfolio runs about 2% vacant across 7.5 million square feet, argues that well-maintained buildings and service matter more than added extras. GFP’s Gural, meanwhile, is getting creative instead of building big amenity centers, offering tenants perks like discounted preschool tuition and a shot at tickets from the company’s suite at MetLife Stadium.
