Manhattan office vacancy falls to 12.6 percent as leasing rises 2.3 percent

Manhattan office vacancy closed the third quarter at 12.6 percent, the lowest level since before 2020, down from 13.1 percent in the second quarter and 14.7 percent a year earlier, according to Commercial Observer.

Leasing volume rose 2.3 percent from the same period last year, and marketwide direct asking rent reached $84.56 per square foot, according to Commercial Observer. Above that average, the outlet reports that rents over $300 a square foot are no longer a rarity and that $400 a square foot is in the market's sights. JLL described the improvement as "broad-based across major industries," according to the report.

American Express's 2 million-square-foot deal for a 55-story global headquarters at 2 World Trade Center is an ownership commitment rather than a lease, and Commercial Observer named it its Office Deal of the Year. The company will solely own the building, according to the outlet, which removes that space from the leasing market while American Express holds it.

Other large commitments include Simpson Thacher & Bartlett signing for 916,000 square feet across 26 stories at Extell Development's 570 Fifth Avenue; Bank of America adding 600,000 square feet to its existing 1.8 million at One Bryant Park on a 20-year term; and Anthropic taking the full building at 330 Hudson Street. Bank of America's 20-year extension at a building it already occupies converts rollover risk into a predictable rent stream.

The only caution Commercial Observer flags is supply: roughly 7.9 million square feet is under construction and expected to come online between 2028 and 2032, and much of it is already pre-leased. That implies little new competing inventory before 2028 and a modest amount after.

Nicholas Farmakis, vice chairman at Savills, framed the durability question around two economies. "There's sort of two economies," he said, according to the report. "There's the asset-based economy, which New York kind of runs off of, and then there's the average U.S. citizen economy. There may be a bit of a spread there." Manhattan occupancy is improving while the backdrop the outlet cites — rising Treasury yields, interest rates, tariffs and war — is not improving alongside it.

As this publication reported, Los Angeles County leasing reached about 4 million square feet in the third quarter, its highest since 2019, while countywide availability ended the quarter at 26.5 percent. Manhattan's 12.6 percent is a vacancy rate and Los Angeles County's 26.5 percent is an availability rate, so the two figures do not measure the same thing.

The question Commercial Observer poses at the end of its analysis is whether the current run marks the start of a long boom for Manhattan office. On the reported numbers, the near-term case rests on scarcity: 12.6 percent vacancy, $84.56 asking rents and no deliveries expected before 2028. A single quarter cannot show whether the demand behind 2.3 percent leasing growth persists once this slate of outsized commitments is signed.