Manhattan office tenant-improvement allowances rise 7.9% to $120.80 a square foot

Manhattan office landlords are funding tenant build-outs at $120.80 a square foot, up 7.9% year over year in September, according to Avison Young data cited by Commercial Observer. The same series has allowances 59.2% above 2019 levels on a 12-month moving average, after a peak in 2024 and a dip in 2025.

Free rent moved the other way: landlords gave just over 10 months per lease on average as of October, down 8.6% from the 2025 figure, Commercial Observer reported. The outlet said the allowance increases show up across every Manhattan submarket and in top-performing asset classes.

Higher interest rates would typically push free rent up while a capital concession like TI holds flat or falls, Vikrant Ghate, Avison Young's New York City manager for market intelligence, told the outlet. Instead, 18 months of strength in the leasing market, plus corporate tenants eager for the best space to draw workers back, flipped the relationship. "TI may prove to be stickier because landlords still need to deliver the competitive space," Ghate said, "particularly when they're asking tenants to make long-term commitments at record-breaking rents."

Trophy-office allowances rose 15.8% this year to $130.40 a square foot, above the $120.80 market-wide figure for September, per Avison Young. Lindsay Ornstein, co-founder of Open Impact Real Estate, separated the concession picture into trophy, Class A, and B and C buildings: "kind of a tale of three cities, from a tenant's perspective."

Construction costs and tenant expectations are pushing the allowance up from the expense side, and the outlet cited an interest rate hike and surging Treasury yields as added pricing pressure. Free rent is rent not collected during the term; a TI allowance is cash spent into the space before the tenant moves in. Shifting the concession from one column to the other commits more capital earlier and less income forgone.

This publication's earlier reporting found Manhattan leasing up 2.3% through the third quarter, with vacancy at 12.6% and direct asking rents at $84.56 a square foot, per JLL data cited by IREI.