United States: New York/ Manhattan office market - H1 2026
Strong leasing activity is reducing vacancies across Manhattan. Class A remains the most popular, but Class B take-up has strengthened as tenants seeking larger footprints have more options in this space.
Job Growth Helps Drive Positive Absorption
After losing some ground in late 2025, Manhattan employment lifted 1.2% year-over-year, supporting 4.7 million jobs as of June 2026. Employment is just below the late 2024 peak, led by growth in office-using sectors, which helped drive eight straight quarters of positive office absorption. Class A space is still accounting for the largest share of absorption, signifying tenants’ clear preference for the newest and best assets, but Class B take-up has strengthened as tenants seeking larger footprints have more options in this space. Lease deals by financial services and law firms were out in front this year with a mix of long-term leases at brand new buildings and significant expansions at existing sites. Tech and AI leasing is ramping up as well and has begun to spread from Midtown South to other areas of Manhattan.
Vacancies are Descending as Class B Space Sees Higher Demand
An active leasing environment is continuing to lower vacancies across Manhattan. The current direct vacancy rate of 12.8% is a decrease of 1.4 percentage points year-over-year and the lowest since 2023. Manhattan rents increased 1.7% year-over-year, led by a 4.5% growth in Class B rates, which are gaining traction as Class A space becomes scarcer. Manhattan's prime rents gained 1.3% from a year ago to $78.13 in Q2, about 24% higher than their Class B counterparts. While some well-appointed spaces are raising eyebrows with asking rates of $300-$400 PSF, these elevated prices are having little effect on the overall rate due to the extremely limited availability at this price point. Vacancy and rents are still far off from their 2019 levels; overall asking rates are still about 9% below their 2019 peak, while prime rates have closed the gap a little tighter at 7% below the peak.
Sales Are Strong in the First Half
Manhattan investment sales approached $6 billion in the first half of 2026, the highest first-half total since 2022. Retail sales accounted for $1.2 billion of the trade volume, slightly below the first half of 2025 result, while office sales were ahead of first half of 2025 at nearly $4.4 billion. The top office deal was for a minority share in Midtown's Park Avenue Plaza, which came it at $949 PSF, valuing the building at $1.1 billion. Other notable sales included the office portion of 575 Fifth Avenue, which traded for $724 PSF, and the recently renovated tower at 250 West 57th Street, which fetched more than $500 PSF. Buyers continue to seek distressed offices for residential conversion, though many investors are still exercising caution, particularly with a new mayor on board who is already driving significant changes in New York City's CRE environment.