Manhattan office leasing tops 10 million s/f for ninth consecutive quarter, Lee & Associates NYC reports

Manhattan, NY Manhattan’s office market continued its recovery in the third quarter of 2026, recording more than 10 million s/f of leasing activity for the ninth consecutive quarter as availability declined to its lowest level in more than five years, according to the latest Q3 Manhattan Office Market Report from Lee & Associates NYC.

Manhattan recorded 10.02 million s/f of leasing activity during the quarter, bringing year-to-date leasing to 34.31 million s/f, an 8.6% increase over the same period in 2025 and the strongest first nine months since 2013. Although quarterly leasing declined 10.9% from 11.25 million s/f in Q2, activity remained 3.1% above the five-year quarterly average of 9.72 million s/f.

Key findings from Lee & Associates NYC’s Q3 2026 report include:
• Midtown: Leasing totaled 6.44 million s/f, while availability declined to 11.8%, its lowest level in more than five years. Class A availability fell to 11.5%, with average asking rents reaching $101.50 per s/f.

• Midtown South: Leasing totaled 2.87 million s/f, up 30.5% year over year, the strongest third quarter since at least 2021. Availability declined to 12.3%, while Class B leasing reached 2.01 million s/f.

• Downtown: Leasing slowed to approximately 600,000 s/f, with availability rising to 13.6% from 13.4% over last quarter. Aon’s 225,212 s/f renewal at 1 Liberty Plaza was the market’s largest transaction.

• Penn District: The Penn Plaza/Garment District submarket led Manhattan leasing with 1.8 million s/f. Availability declined to 9.6%, less than half its early-2023 peak, with 978,000 s/f of positive net absorption.

The Manhattan office availability rate fell to 12.3%, down 60 basis points from the previous quarter and 170 basis points year over year, marking the tenth consecutive quarterly decline. The market also recorded 2.7 million s/f of positive net absorption, its sixth consecutive quarter of gains, up from 616,000 s/f in Q2.

“The Manhattan office market continues to demonstrate remarkable resilience. While leasing activity moderated slightly in the third quarter, we’ve now seen nine consecutive quarters of more than 10 million s/f in leasing activity and ten straight quarters of declining availability. Companies across a broad range of industries are making significant, long-term commitments to New York City, and we’re seeing that demand extend well beyond the city’s trophy office buildings,” said Todd Korren, executive managing director and director of leasing at Lee & Associates NYC.

The quarter’s largest transaction was AI company Anthropic’s 446,684 s/f lease at 330 Hudson St. in Hudson Square. Other major transactions included law firm Proskauer Rose’s 412,874 s/f renewal at 11 Times Square, NBCUniversal’s 244,185 s/f renewal at 1221 Avenue of the Americas and Morgan Lewis’ 209,577 s/f lease at 1251 Avenue of the Americas.

Class A properties accounted for 62.3% of Manhattan leasing during the quarter, totaling 6.24 million s/f. Class B leasing reached 3.09 million s/f, or 30.9% of the total, with Class B properties capturing 70% of Midtown South leasing activity.

Demand increasingly extended beyond Manhattan’s trophy office buildings. Class B availability fell to 12.5%, below Class A availability of 12.7%, while Class B asking rents rose 3.5% year over year, outpacing the 2.7% increase for Class A. The Manhattan average asking rent increased 3% year over year to $79.75 per s/f.

Technology companies, particularly those operating in artificial intelligence, remained an important source of demand. In addition to Anthropic’s Hudson Square commitment, AI-focused legal technology company Legora signed a 98,420 s/f lease at 11 Madison Ave. Law firms, media companies and other established businesses also made significant commitments during the quarter.

Despite the quarter-over-quarter moderation in leasing, continued positive net absorption, tightening availability and higher asking rents point to improving Manhattan office fundamentals heading into the final quarter of 2026.

“One of the more encouraging trends is the improvement in the Class B office market. With Class B availability now slightly below Class A and rents continuing to rise, we’re seeing evidence that the recovery is extending across a broader range of properties. Looking ahead, we expect leasing activity to remain healthy, although competition for well-located, quality space will continue to intensify as available inventory declines,” said Korren.