The Defining Facts of the Q1 2025 Leasing Market

A strong start to 2025 indicates a significant resurgence in the Manhattan office leasing market, presenting encouraging trends across all submarkets. Below are 11 defining facts highlighting the activity in Q1:

Manhattan Overall:

• Manhattan’s leasing market experienced robust activity in Q1 2025, totaling 7.89 million square feet. This figure represents a significant 57% increase over the five-year quarterly average of 5.02 million square feet, suggesting a potential return to pre-pandemic leasing volumes if this pace continues.
• Year-to-date leasing activity demonstrates strong momentum, exceeding Q1 2024 figures by 59%.
• The overall Manhattan availability rate continued its downward trend, decreasing by 50 basis points from the previous quarter to 18%. This represents a substantial year-over-year decline of 210 basis points, indicating tightening market conditions.
• Net absorption in Manhattan was a positive 3.00 million square feet in Q1 2025, further underscoring the strong demand.

Midtown:

• Midtown’s leasing activity reached 4.85 million square feet in Q1 2025, a 47% increase compared to the five-year quarterly average of 3.31 million square feet, although it was down 14% from the particularly strong Q4 2024.
• Year-to-date leasing activity in Midtown shows a healthy increase of 31% compared to the prior year.
• Despite the positive leasing activity, Midtown’s overall availability rate remains elevated at 18%. However, the Midtown Core district, characterized by premier properties, exhibits significantly lower availability.

Midtown South:

• Leasing activity in Midtown South totaled 1.61 million square feet in Q1, a strong 55% ahead of the five-year quarterly average of 1.04 million square feet.
• Midtown South experienced a remarkable 136% year-over-year increase in leasing activity. Nevertheless, the availability rate in this submarket remains high at 21.9%.

Downtown:

• Downtown demonstrated strong leasing activity in Q1, totaling 1.42 million square feet, a significant 111% ahead of the five-year quarterly average of 674,000 square feet.
• Year-to-date leasing activity in Downtown showed the most significant year-over-year growth, with a 145% increase. Similar to Midtown South, however, the availability rate remains elevated at 21.9%.

Summary:

Following five years of fluctuating market conditions, the latter half of 2024 and the first quarter of 2025 signal a notable return to pre-pandemic levels of leasing activity in the NYC office market. Adding to this positive outlook is the sustained strength of NYC’s professional office employment sector, indicating continued demand drivers. However, the market continues to navigate challenges including the ongoing preference for remote work among many employees, inconsistent enforcement of return-to-office mandates, the limited appeal of outdated office spaces, and policy shifts from the new administration contributing to broader business environment uncertainty.

Please do not hesitate to reach out with any questions regarding the market, specific properties, or any requirements you may have.

Sincerely,

Paul