The Manhattan office sector is witnessing a notable resurgence, with 11.02 million square feet of office leasing signed in the second quarter of 2026, marking a 29.4% increase over the five-year quarterly average and a 31.3% rise compared to the 10-year average, according to Colliers.
This demand is up over 19% year over year and represents the first time since 2002 that demand has exceeded 11 million square feet for three consecutive quarters. The first half of 2026 has shown the strongest demand in two decades, while supply has remained stable, leading to the largest mid-year annual growth in asking rents since 2016.
Frank Wallach from Colliers attributes this growth to a combination of return-to-office movements and rising demand from key sectors such as tech, legal, media, and financial services. Additionally, AI-related leasing has surged, with 800,000 square feet leased in the second quarter, surpassing all AI leasing in Manhattan for 2025.
The market is also experiencing a flight to quality, favoring newer Class A buildings, while older buildings are seeing increased vacancy rates. Interestingly, there is a rebound in demand for Class B buildings, with leasing up 14% from pre-pandemic levels, indicating a shift in the market dynamics.
Victor Rodriguez from CoStar notes that this suggests a broader recovery beyond just high-end properties, as mid-market demand begins to return. Overall, the tightening availability in older buildings and the record-high average asking rents for Class B properties signal a significant transformation in Manhattan's office leasing landscape