July 8, 2026
During the second quarter of 2026, tenants signed leases for 11.02 million square feet of Manhattan office space, according to a new report from commercial real estate firm Colliers. That figure is 29.4 percent above the five year quarterly average and 31.3 percent above the ten year average.
Combined with the first quarter, Manhattan logged its strongest first half leasing velocity since 2002, according to Commercial Observer's coverage of the same Colliers data.
A few forces are converging at once. Return to office mandates have picked up steam across finance, legal, media, and tech. At the same time, artificial intelligence companies have gone from a minor presence in the Manhattan office market to a genuine driving force.
AI firms leased roughly 800,000 square feet in the second quarter alone, which already surpasses all of the AI related leasing recorded during the entirety of 2025, per CNBC's reporting. Law firms have also been unusually active. According to Commercial Observer, professional services accounted for about 30 percent of all leasing activity in the quarter.
There is also a quieter, structural piece to this puzzle. Millions of square feet of aging office buildings are being converted into residential or hospitality uses. Every time one of those buildings goes offline, tenants who were sitting there have to relocate, which adds another wave of leasing activity into the market and helps shrink the glut of available space.
Mostly, but not entirely, and that is actually one of the more interesting shifts happening right now. There has been a well documented "flight to quality" over the past several years, with Class A buildings (the newer, amenity rich towers) soaking up the lion's share of demand while older Class B buildings sat half empty.
That trend is starting to soften. A separate report from CoStar found that Class B leasing in the first half of 2026 was up 14 percent compared to pre pandemic levels and up 28 percent compared to the same period last year, as noted in CNBC's coverage.
Rents are climbing, and climbing quickly. Manhattan's average asking rent hit $78.03 per square foot in the second quarter, the highest level since July 2020, according to The Real Deal's reporting on Colliers' data. That represents a 5.7 percent increase year over year, which is the sharpest midyear jump since 2016.
Availability is tightening alongside rents. The availability rate fell to 13 percent in the second quarter, down from 13.7 percent in March, marking nine consecutive quarters where availability either declined or held steady. Class A space in particular is getting harder to find, with nearly 69 percent of all leasing activity happening in four and five star buildings.
Disclaimer: This content is intended for informational and educational purposes only and is not intended to be construed as legal, tax, financial, or insurance advice. Every property and tax situation is unique. Please consult a licensed attorney, CPA, or tax professional regarding your specific circumstances before making any decisions related to property improvements, tax assessments, or real estate transactions. Mohammed M. Rahman is a licensed real estate broker in New York. Contact: Mo@ClosedByMo.com.
