Colliers' recent report shows a strong recovery in Manhattan's office market: about 1 million square meters of office space were leased in the second quarter. That figure is 29 percent above the five‑year quarterly average and 31 percent above the ten‑year quarterly average. Year‑over‑year demand rose by just over 19 percent.
The report notes that leasing volume exceeded 1 million square meters for three consecutive quarters — the first time that has happened since 2002. In the first half of the year tenant demand reached its highest level in more than twenty years, while supply remained unusually tight or unchanged to a degree not seen in nearly two decades. As a result, asking rents increased substantially; the mid‑year annual rise was the largest since 2016.
Who is driving demand?
Colliers analysts attribute the surge to a combination of factors: a return to office work, and growing demand from key sectors including technology and artificial intelligence companies, law firms, media and financial services. Another contributor is that several hundred thousand square meters of office stock are planned for conversion to other uses, prompting a wave of relocations among companies that must move.
Notably, leasing by artificial intelligence firms climbed to roughly 74,000 square meters in Q2, up from about 65,000 square meters in the prior quarter; that quarterly AI leasing total alone exceeded all Manhattan AI leasing in 2025.
Premium vs. mid‑market: A‑class strong, B‑class returns
The market shows a clear preference for A‑class offices — modern, well‑equipped buildings are in particularly high demand while older properties often sit partially vacant. Unusually for the broader U.S. trend, however, B‑class buildings in Manhattan have also become sought after again. According to CoStar analysis, B‑class leasing in the first half of this year was 14 percent above pre‑pandemic levels and 28 percent higher than the same period last year.
CoStar suggests that New York's office recovery may be entering a new phase: after years focused largely on the top end of the market, more price‑sensitive, mid‑market demand is returning. At the same time, supply of older office space has tightened significantly, and B‑class stock finished the second quarter with a record‑high average asking rent.
Geographic differences and implications
Both New York and San Francisco have benefited strongly from demand related to artificial intelligence, while conditions remain more challenging in other parts of the United States. The shift in demand composition, constrained supply and rising rents are reshaping Manhattan's office market and have brought certain activity levels back to those not seen since the early 2000s.
Overall, Colliers' and CoStar's data indicate that Manhattan is experiencing its strongest office‑market upswing in about twenty years, driven primarily by expansion in the technology and AI sectors and by a broader return of tenants to office space.
