Office rent in Manhattan in the fourth quarter was the strongest in 6 years

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olek. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. subscription To receive future issues, directly to your inbox.

Office rent in Manhattan rose significantly in the fourth quarter of 2025, driven by a continued return to offices and increased technology hiring, especially in the field of artificial intelligence.

Rents rose more than 25% from the third quarter to 11.87 million square feet, according to Colliers. Demand was 16% higher year-over-year, nearly 52% above the five-year quarterly average and 43.5% above the 10-year average.

Colliers found that this was the strongest single rental quarter on the island since the fourth quarter of 2019. For all of 2025, rental volume was the highest since 2019 and just 2.4% lower than 2019’s pre-pandemic total.

“Manhattan’s strong performance in 2025 was not a surprise, but was instead a continuation of the recovery we began to feel in 2024,” said Frank Wallach, executive managing director of New York research and business development at Colliers.

“Demand in 2025 was a continuation of this trend, although significantly accelerated by factors such as the flight of tenants to quality to attract and retain talent, the implementation of the return-to-office trend, significant expansions by major tenants – such as Amazon, NYU, and BlackRock – and emerging AI industry leasing space throughout Manhattan.”

Wallach also noted high demand from various industries, including finance, technology, law, education, medical nonprofits and government.

The supply of available office space is still much higher, about 37% higher, than it was at the start of the pandemic in March 2020, but well below the post-pandemic peak in February 2024, according to Colliers. As demand rises, the excess supply is slowly being absorbed, and supply in Manhattan is now the lowest since November 2020.

The lack of supply ultimately helps boost rents. Colliers found that the average asking rent in Manhattan was 1.5% higher in the fourth quarter than in the previous quarter, and was $76 per square foot, the highest average in Manhattan since October 2020. For the highest level, a so-called Class A product, which is newer construction, the average asking rent rose 1.6% to $83 per square foot, Colliers said.

The Class B office product is older but tends to be in good locations. She now sees owners investing in improvements and renovations as demand increases. That helped rents grow in the fourth quarter by 1.1% to a record high of $68.61 per square foot, according to Colliers.

There remains a trend toward quality, with 69% of total leasable space in four- and five-star buildings, up from 66% in 2024, according to a separate report by CoStar. It found that every one of the 15 largest office leases signed during the year was in four- or five-star properties. For example, Deloitte’s commitment to 800,000 square feet at 70 Hudson Yards, Manhattan’s premier office building, was the largest lease of the year.

Overall quarterly net absorption, a measure of how much physical tenants occupy space versus how much space they leave, was positive at nearly 4 million square feet, according to the Colliers report. For all of 2025, it was positive by 15.56 million square feet, including 2.14 million square feet of space removed from the market for planned conversion to non-office use.

“Critically, the recovery and strong demand in 2025 were also fueled by millions of square feet of building conversions to non-office uses, spurring a wave of leasing by tenants moving out of those buildings,” Wallach said.

Despite the improvement in the market, there is still much more office supply than there was before the pandemic.

“Despite increased tenant demand and tighter availability in 2025, the Manhattan office market has shed only half of the excess available supply after the pandemic. Thus, the healthy demand recorded in 2025 and transfers of underutilized office assets in 2026 and 2027 should continue.”