- Manhattan landlords are placing tenants in newly vacated blocks before marketing them, and JLL says these off-market deals form a shadow market missing from official availability figures.
- Colliers shows Q3 leasing of 10.06M SF, year-to-date demand of 32.86M SF, availability at 12.4%, and average asking rent at $78.36 per SF, the highest since July 2020.
- AI tenants chasing built-out space in Midtown South, plus an 80% collapse in the supply pipeline, leave tenants little time to shop around and landlords with the leverage.
Landlords across Manhattan are quietly leasing space before it is listed, and off-market office leases are growing as a result, according to JLL as reported by Commercial Observer.
JLL says, per Commercial Observer, that these deals form a shadow market that never appears in official availability figures.
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A Market Built for Speed
Melanie O’Brien leads research at JLL. She told Commercial Observer that this trend is less about waiting for higher rents and more about leasing speed. Landlords can now skip much of the marketing and launch work they once did. That’s because tenants are moving quickly.
Similarly, Kirill Azovtsev, a vice chairman at Savills, told Commercial Observer that brokers anticipate upcoming vacancies. As a result, some blocks never reach the market.
Colliers data shows Manhattan leased 10.06M SF in the third quarter. That’s 16.2% above the five-year quarterly average. Year-to-date demand reached 32.86M SF, the strongest comparable period since 2000.
What Goes Off-Market
Most off-market leases involve recently vacated blocks of about 5,000 to 20,000 SF. These spaces typically span one or two floors, Commercial Observer reported. Some tenants lease directly, while others sublease the space to give landlords a short-term solution.
Larger deals are also happening. One source told Commercial Observer that an AI company signed a roughly 30,000 SF lease at 71 Fifth Ave. The deal came before marketing began, at rents among the building’s highest. Spokespeople for owners Madison Capital and Lubert-Adler Partners did not respond to Commercial Observer’s request for comment.
The same source said another AI firm is quietly seeking about 50,000 SF in Midtown South. Meanwhile, a source told Commercial Observer that three tenants used rights of first offer on Park Avenue. Each took roughly 50,000 SF without the landlord marketing the space.
AI Tenants Drive the Hunt
CBRE executive vice president Evan Haskell told Commercial Observer that AI tenants want ready-to-use, built-out offices. However, very few spaces meet that need. Patrick Steffens, a senior director on Avison Young’s office leasing team, said SoHo and the Meatpacking District have almost no good space left.
Steffens said Avison Young advises several AI companies searching for hidden space. His team also missed several sublease opportunities in recent weeks because the blocks were too large for its clients.
In another example, a source told Commercial Observer that brokers found off-market subtenants for leftover SoHo space. This happened after SpaceX acquired AI coding assistant Cursor in August.
Zooming Out
Colliers puts Manhattan’s availability rate at 12.4% for the third quarter. That’s down 0.6 percentage points and marks the tenth straight quarter of tightening or no change. No such streak has lasted this long since 2007.
JLL’s O’Brien told Commercial Observer that some submarkets have even less available space. Pending deals have yet to appear in the official figures, she said.
Average asking rent reached $78.36 per SF, its highest level since July 2020. That’s a 4.6% increase from a year earlier. Meanwhile, Class A asking rents hit a record $85.45 per SF, according to Colliers.
As we covered, Midtown availability has returned to its March 2020 level. AI firms also leased nearly 1.1M SF in Manhattan during the third quarter. That’s more than the 790K SF they leased during all of 2025.
Why It Matters
Off-market deals can carry risks for landlords. Azovtsev told Commercial Observer that owners who bypass the market never learn what tenants might have paid. Still, rents continue to test new highs. Our coverage of the record $375 lease at 625 Madison illustrates that trend.
More supply won’t arrive soon. Haskell told Commercial Observer that Manhattan’s office development pipeline has shrunk 80%. He added that Midtown has only 10 blocks larger than 250,000 SF available. That number falls to about four when excluding buildings in special servicing or facing capital stack problems.
New developments also have limited availability. Haskell told Commercial Observer that anchor tenants signed leases years ago for roughly 70% of the space in upcoming projects.
What’s Next
Several major projects will eventually add supply, Commercial Observer reported. These include Related’s 858,500 SF 625 Madison, Related and Oxford’s 1.4M SF 70 Hudson Yards, and BXP’s 930,000 SF 343 Madison.
However, those towers remain years away. Until then, tenants will likely continue making fast decisions to secure suitable space.
