Manhattan Office Market Closes 2024 With Most Active Quarter In 5 Years

Office landlords and tenants signed a total of 10.2M SF of leases in Manhattan in the final three months of 2024, according to new Colliers data, setting the stage for continued uptake in the New Year.

Total leasing in the fourth quarter was 18.3% higher than the previous quarter and was the strongest quarterly volume seen in Manhattan’s office market since Q4 2019, according to Colliers. Leasing in 2024, totaling 33.3M SF, reached its highest point in five years and was 22.4% higher than in 2023.

New York City’s office availability has dipped significantly as a result, coupled with a surge in planned conversions leading more landlords to take office buildings offline. Manhattan's office inventory shrank by nearly 6M SF over the course of 2024, according to Savills data.

“Even in the first few days of 2025, we are hearing about planned conversions,” Frank Wallach, executive managing director of research and business development at Colliers, told Bisnow in an email. “No reason to expect an end to planned conversion announcements in the new year.”

Nearly 20% of the quarter's leasing volume came from just three leases: Bloomberg’s 925K SF extension and expansion at SL Green’s 919 Third Ave., Citadel’s 504K SF new lease at Brookfield’s 660 Fifth Ave. and law firm Ropes & Gray’s 430K SF relocation to RXR’s 1285 Sixth Ave.

Two prevailing dynamics point to continued potential strength in 2025 for Manhattan’s office market.

First is demand for trophy and Class-A office space, which accounts for 64.8% of Manhattan's inventory but captured 79.3% of Q4’s leasing volume. That brought the trophy availability rate down to 12.3%, its lowest point in three years, following five consecutive quarters of tightening, Wallach said.

“As we’ve seen in previous cycles, an eventual lack of trophy space can benefit the non-trophy Class A and B+ product as some tenants will look to those buildings as a viable option,” he said. “Other tenants, meanwhile, will only look to trophy or new construction options.”

The second factor is landlords removing office space from the market for conversions, Wallach said. 

“The millions of square feet of planned conversions have begun to chip away at the oversupply of non-trophy space,” Wallach told Bisnow.

Net absorption was also positive for the third quarter running, reaching its highest point in a decade by the end of the year at 7.3M SF. Absorption in 2023 was negative 5M SF. 

The most popular submarket during Q4 was one where just a few years ago, analysts were questioning its future: Midtown, which accounted for 77% of leases signed during the quarter according to Savills. 

“The most striking data point was the renewed strength in the Midtown market,” Wallach said. “Prepandemic there were questions about how the Midtown market would fare with strong competition from Hudson Yards/Manhattan West, Downtown and other areas of Manhattan. But Midtown’s full-year leasing volume in 2024 was the highest since 2018.”

Average asking rents in Manhattan decreased for the sixth consecutive quarter, with the overall average falling by 0.9%. That brought asking rents for Manhattan office to its lowest average in three years, at $73.42 per SF, according to Colliers’ report.

That price drop affected office classes across the board: Class-A asking rents fell by 0.7% during the quarter, while Class-C office space prices dropped by a full percentage point. 

The researchers attributed the overall drop in asking rents to higher-priced space being leased up and therefore removed from the market and new vacancies with lower asking prices opening up. 

Even despite the tightening market and increased activity, the city's available supply of office space is still 65% above what it was in March 2020, according to Colliers. And there is more than $27B of CMBS loans tied to Manhattan office buildings set to mature over the next three years, according to Savills, a sign that there is still ample vulnerability among landlords.

“Pockets of the market returned to prepandemic leasing volume while others continued their march towards reaching prepandemic availability,” Wallach said in a statement. “Nonetheless, the momentum seen in 2024 must continue in 2025 to achieve overall recovery in the market.”