Manhattan office asking rents jump 9% in a quarter to $85.08 as available space hits its lowest since 2020

Manhattan office leasing reached 10.06 million square feet in the third quarter, and available space fell to 64.76 million square feet, the least since August 2020, according to Colliers research reported by Commercial Observer. The availability rate was 12.4%, the tenth straight quarter of tightening and the longest such run since 2007, Colliers said.

The average asking rent rose to $85.08 a square foot, the highest since July 2020, from $78.03 in the second quarter.

The numbers in context

Leasing has now topped 10 million square feet for four straight quarters, which Colliers said had not happened since 2002. Midtown South had its strongest third quarter on record, at 4.75 million square feet. Large deals included Anthropic's 465,630 square feet at 330 Hudson Street and Proskauer Rose's 478,000-square-foot expansion at 11 Times Square.

The thing the headline gets wrong: a 9% rent jump is partly a mix effect

Average asking rent is calculated on space that is still available, not on leases that were signed. When big blocks of cheaper or older space are leased, they drop out of the average, and the average rises even if no landlord has raised a price. With leasing running well above normal, some of the jump from $78.03 to $85.08 is likely to come from that change in mix. A real 9% rise in rents in three months would be extraordinary.

Colliers' own commentary points to real price gains at the top: Class A pricing reached a new high, and Midtown became the first major Manhattan market to return to its pre-pandemic availability, said Franklin Wallach, Colliers' executive managing director of research in New York. The fair reading is that the best buildings are getting more expensive and the overall average overstates how fast.

Not the national office story

This is Manhattan, not the office market as a whole. Nationally, office CMBS delinquency is at 13.2%, the highest since at least 2019, and most of that distress is about refinancing with the 10-year Treasury above 5%. Both things are true at once: demand for well-located Manhattan towers is strong, while owners of weaker buildings elsewhere still struggle to refinance. One does not offset the other.

Who it actually hits

Big tenants such as law firms and AI companies are driving the headline deals, but small office tenants have the least bargaining power when space is scarce. CheckThisBiz lists 120,033 independent businesses in New York City, including 2,139 professional service firms, 1,092 financial service firms, 922 law firms and 819 advertising agencies. Many of them lease a few thousand square feet.

The arithmetic is simple. At the average asking rent, 5,000 square feet is about $425,400 a year, against about $390,150 at last quarter's average, a difference of roughly $35,000. Given the mix effect, that overstates what a typical renewal will actually cost. It does show the direction of travel. A tenant with a lease ending in 2027 is negotiating against a lower availability rate than at any point since 2020, and starting talks early gives it more options while there is still space to compare.

Sources: Commercial Observer, citing Colliers research; CheckThisBiz business counts for New York City. The rent arithmetic and percentage changes are Chronicle calculations. This is market information, not investment advice.