The Knicks weren’t the only outfit in New York to go on a historic winning streak this spring. The office market closed out the first half of the year with a run of leasing activity that hasn’t been seen in the Big Apple since 2002.
Bisnow/Ethan Rothstein
Companies signed 11M SF of leases in the second quarter and 22.8M SF through the first six months of the year, putting the market on pace for its busiest year since 2000, according to Colliers.
Law firms taking space in high-end buildings continue to drive the market, with Simpson Thacher & Bartlett’s 916K SF prelease at Extell Development‘s 570 Fifth Ave. the top deal of the quarter.
But there were bright spots aplenty for office owners. Firms specializing in artificial intelligence signed a combined 800K SF of leases in the quarter, bringing their year-to-date total to 1.5M SF, twice their commitment in all of 2025, said Frank Wallach, Colliers executive managing director of research in New York.
Availability is down in Midtown, Midtown South and Downtown, driven not just by new leases but also by buildings being removed from the market for future conversion. The city’s overall availability rate was 13% at the end of Q2, the lowest it has been since October 2020. The average asking rent rose by 5.7% year-over-year to $78.03 per SF, the sharpest midyear growth since 2016.
“That was definitely a ‘wow,’” Wallach said of the rent increase.
More than 900K SF of office space was taken offline for conversion, which doesn’t just have the effect of reducing available supply. It also creates demand for the remaining offices, as many of the buildings slated for conversion aren’t entirely empty, and their existing tenants need to find new space.
For every 1M SF of office space being converted, 250K SF of demand is generated for other buildings, Wallach said. With conversions now allowed in Midtown and Midtown South, the spillover impacts are widening.
“That’s uniquely playing a role,” he said. “This additional wave of demand spurred by conversions is positively impacting all three markets.”
The combination of the strong demand and reduced supply has led to a tightening market, especially in newer buildings in Midtown. Buildings constructed after 2000 in the submarket have an availability rate of 6.7%, Wallach said, lower than pre-pandemic levels. Park Avenue‘s average asking rent is now $120 per SF, well above where it sat in March 2020, at $105 per SF.
More landlords are raising their asking rates on their available space, and even Class-B asking rents hit a new record of $70.58 per SF citywide in the second quarter.
As the positive momentum in the market has kept up following last year, when 15M SF of office space was absorbed, landlords are regaining leverage. Taking rents were 10% below asking rents in 2024 before narrowing to 8% last year. While final taking rents for Q2 aren’t available, Wallach said the spread shrank to 6% in the first quarter.
“We went through the concession wars of the last 15 years, and that’s definitely entering a new chapter,” he said. “It’s the first time in a long time that it’s not just going in one direction.”
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