United States: New York/ Manhattan office market - 2025
Vacancies are descending, but excess Class B space is pressuring Rents. Investment sales volume ticks up again.
Manhattan absorption soars
Manhattan employment rolls are at peak level, but growth has slowed to just 0.9% year over year, echoing the nationwide pullback in hiring. Even so, Manhattan's net office absorption was a robust 15.7 MSF in 2025, the strongest in over a decade and nearly triple the prior year's result. Class A take-up is driving overall absorption, signifying tenants’ clear preference for the newest and best assets, but Class B has strengthened as well. Deals from tech and AI companies are ramping up, joining NYC's more prominent sectors like law, finance, and media, and we continue to see significant long-term renewal and expansion deals by large, well-established tenants, indicating a recovery that is well underway.
Vacancies are Descending, but Excess Class B Space is Pressuring Rents
The active leasing environment is beginning to help lower vacancies across Manhattan. The current direct vacancy rate of 13.5% is a decrease of 0.9 percentage points year-over-year, following five years of annual increase. Manhattan also saw a mild year-over-year pullback in rents that is partially attributed to the declining vacancy; as higher-priced trophy spaces lease up. Less pricey space, particularly in Class B assets, remains on the market, lowering the overall ask. Manhattan prime rents dipped 3.1% year-over-year to $77.38 PSF in Q4, though some well-appointed spaces are asking upwards of $200 PSF, with some approaching the $300 PSF mark. Further evidencing the "tale of two markets," prime rents are roughly 27% higher than their Class B counterparts.
Sales Volume Ticks up Again
Manhattan investment sales were up again in 2025, reaching their highest total since 2019. Retail volume was $2.7 billion for the year, slightly ahead of the 2024 result, while office sales topped $11.1 billion. Total volume of $14.0 billion, including industrial, was well ahead of last year's $10.4 billion. Some of the top deals were for partial stakes in highly valued assets. The largest office investments were a minority stake in One Vanderbilt Avenue for $2,712 PSF, putting a $4.7 billion price tag on the trophy tower, and a minority stake in 1345 Avenue of the Americas that valued the tower at $1.4 billion. Other buyers were scooping up distressed offices with an eye for residential conversion, though many investors are still exercising caution, particularly with a new mayor on board who could invoke significant changes in New York City's CRE environment.