I’d been working with an established marketing agency since March. When he called in June to ramp up the search, he didn’t ask what five years would cost, or how much flexibility we could squeeze into the lease. He told me to go find him ten years. Ten. With a renewal option on the back.
Two years ago that same client wanted three years and an early termination clause, so this got my attention. The question he was asking had flipped completely. He used to want to know how fast he could get out. Now he wants to know the space will still be his in 2036, at a rent he can predict. Getting locked in stopped scaring him. Getting priced out took its place.
So when the July figures dropped last week and every trade paper announced a “historic month” for the Manhattan office market, my reaction was basically: yes, I know. My calendar had been telling me since April. The report just put numbers to decisions tenants in the Manhattan office market had already made.
I’ll walk through those numbers, because some of them are exciting. But that phone call still tells the story better. Three years became ten, and the early termination clause became a renewal option. Good luck finding a cleaner picture of where tenants’ heads are right now.
What the Colliers Report Said
July brought 3.87 million square feet of leasing, up 22% on the month and 28% on the year, which sets 2026 up to beat any year since 2000. Availability across the Manhattan office market fell to 12.7% and asking rent held at $78.03.
Two deals and a renewal did most of that work. Anthropic swallowed 330 Hudson whole, all 465,630 feet, and carried Midtown South to half the borough’s volume by itself. Snap took roughly 200,000 at PENN 2. NBCUniversal re-upped for 244,200 at 1221 Sixth in Midtown.
Four outlets ran the release inside two days, and three of them used the identical adjective. Still, none stopped to ask what a headline like that means for a fourteen-person shop with a lease expiring in March.
I’ll take a swing at it.
The Broker’s View: What We’re Seeing
The Colliers numbers confirm what we’ve seen on the ground. Inquiries are running at levels we haven’t seen in years, and the amount of commercial space leased over the last 60 days has been exceptional.
But the more revealing signal isn’t volume. Because volume is a receipt for decisions people made last winter.
What’s changed is the tenant psychology. A year ago, much of the conversations revolved around pricing and concessions. Now, they focus more on actually identifying available space, since much of the inventory has been absorbed. Two of my deals this summer went to a second bidder. In all of 2024, I didn’t have one.
Landlords are somewhat quieter and are often weighing competing offers for the same space. That’s what I’d pay closer attention to. Owners who spent 2023 promising to work with us on anything now take their time to answer a proposal.
The Two-Year Deal Is Dead
I had a client in 2023, with a ten-person operation, who found a space on lower Fifth he loved. His board was certain we’d see 25% vacancy by 2025 and told him to ride it out on something short. He signed last November, three blocks north, worse light, about $9 a foot more. He’s never brought it up. Neither have I.
That was the consensus then. Two to three years, an early termination clause, wait for the bottom. They were hedging, and you couldn’t blame them for it.
But now, that’s over, with one exception. AI companies and tech startups still want a short term lease, generally one to two years, and they have a real reason for it: a forty-person firm can become four hundred by spring.
Outside those two groups, short terms have gotten a lot less common. Most of what we field now runs five to ten years, including ten-year leases with renewal options, a structure tenants reach for when they want long-term security but aren’t ready to fully commit.
What a Longer Term Buys You
That shift in lease term preference tells you everything about where tenant psychology sits. They’ve decided the market turned, and they don’t want to get caught without space when it tightens further.
The numbers back them up. Free rent on new Manhattan deals ran 12.4 months in the first half, the thinnest since 2019, and build-out money has sat near $140 a foot for three years while construction costs climbed straight through it. Same allowance, less office.
Take 6,000 square feet in a decent Midtown B building. What an owner funds over three years against what he funds over ten is a six-figure difference before anyone says the words “free rent.” Our lease term breakdown adds more context.
The Neighborhood Migration Story
All of this assumes you’re staying put. My client isn’t, and that’s the rest of the June call.
His landlord came back with a renewal about twenty dollars a foot over what he pays now. Four minutes on whether that was negotiable, the rest on where else he could go. As certain neighborhoods have gotten expensive, tenants whose leases are expiring aren’t renewing in place. They’re relocating.
Flatiron is the clearest example. Asking rents there and in Union Square reached $87.18 a foot in the first quarter, up 8.9% on the year, and no submarket in the Manhattan office market climbed faster. He signed in late 2020, right after the floor dropped out, and that’s the rent he’s giving up.
You don’t close a twenty-dollar gap at the table. He’s already looking downtown, and his loft space will re-let inside a month at the new number. I saw this coming in June, when small tenants still believed they had options here.
This is a real movement happening right now, not a prediction.
Where They’re Going
Most of them go downtown. The Financial District averages $64.23 a foot against Midtown South’s $79.13, so a Flatiron tenant in the high eighties cuts his rent by roughly a quarter and keeps a one-seat subway ride to work.
Then there’s Broadway, Park Row, John Street: the Insurance District. This submarket prices under even that on older stock, and I place a lot of small professional firms in it.
Third is the Penn Station area, where Class A runs mid-$60s to low-$80s. That one sells itself to any tenant with half a staff commuting from New Jersey or Long Island.
All three are on my client’s list this month.
Even the Value Neighborhoods Are Tightening
The catch is that all three are tightening behind him.
Downtown asking rents hit $64.23 a foot in July, the highest since August 2020, and available supply fell to 15 million feet. That’s down 34.9% from its post-pandemic peak in February 2024 and 20.5% year over year. Meanwhile, leasing there ran 21.7% ahead of last July.
That third off your rent used to be closer to half. The discount shrinks every quarter, and at some point Downtown stops being anybody’s answer.
Tenants moving in 2027 will find a worse trade than the one my client is getting this month. He knows it. That’s most of why he’s moving now.
What I’d Tell You If Your Lease Is Up in 2027
My advice hasn’t changed since spring:
- Start Eighteen Months Out: My 2023 client read the market right and still lost, because he timed his search off his expiration instead of what was available. By the time his board approved, the space was gone and the two behind it had repriced.
- Plan On Relocating: A renewal twenty dollars a foot over your rent usually ends in a move. Add four to six months, since you’ll be touring and building out rather than signing an extension.
- Know Your Square Footage First: Half the tenants I meet shop for thirty percent more room than they need, usually for a conference table they’ll use twice a year. Nail it before you tour and you’ll pay for fewer feet. Our calculator takes four minutes.
- Take the Longer Term: Free rent and build-out allowance are both priced off the length of the deal, so ten years with renewal options buys a package three years never will. Your CFO will hate that number less than the 2029 renewal.
The Bottom Line on the Manhattan Office Market
There’s nothing in the pipeline that loosens the Manhattan office market. New construction is thin, conversions keep pulling buildings out of the count, and availability has ground down nine quarters running. Even a bad spring for demand wouldn’t put a floor back on the market.
What that does to the gap between neighborhoods is the part worth watching. My client is saving roughly a quarter on his rent by moving this month, and by the time the 2027 leases come due, that same move is probably worth closer to a fifth.
He’d tell you he got lucky on timing. What he did was stop waiting a year before the people calling me now, and that instinct sits behind every ten-year request I’ve fielded since spring.
Tenants have decided they’d rather overcommit on a lease than come up short on a building.
Sometime next spring I’ll be explaining to a tenant why the space he wanted in March was gone by June, and there won’t be much to say past the fact that he waited.
