New York City’s office market posted its strongest first half in more than two decades, fueled by major law firm deals, surging AI leasing, and a shrinking supply of available office space, according to BisNow.
Companies leased 11 million square feet of office space in the second quarter, bringing first-half leasing to 22.8 million square feet. According to Colliers, that puts Manhattan on track for its busiest leasing year since 2000 and marks the strongest first-half performance since 2002.
Law firms remained the biggest driver of demand, led by Simpson Thacher & Bartlett’s 916,000-square-foot prelease at 570 Fifth Avenue. At the same time, artificial intelligence companies rapidly expanded their office footprints, signing roughly 800,000 square feet during the second quarter alone and 1.5 million square feet through the first six months of the year—double the amount leased during all of 2025.
AI Firms Add Momentum
The growth of AI companies has become an increasingly important source of office demand, particularly for high-quality buildings. Combined with continued expansion from legal tenants, the sector is helping offset weaker demand from other industries and supporting leasing across Manhattan.
Office Conversions Tighten Supply
Demand has also been strengthened by a growing wave of office-to-residential conversions. More than 900,000 square feet of office inventory was removed from the market during the second quarter, reducing available space while forcing many existing tenants to relocate.
Availability across Manhattan fell to 13%, the lowest level since October 2020. Newly built Midtown properties have become especially scarce, with availability dropping below pre-pandemic levels.
Rents Continue to Rise
With demand increasing and supply tightening, asking rents continued climbing. Average office asking rents reached $78.03 per square foot, up 5.7% from a year earlier—the fastest midyear increase since 2016.
Premium buildings continue to command the strongest pricing, with Park Avenue rents rising well above pre-pandemic levels. Even Class B buildings reached record asking rents as landlords regained pricing power and concessions continued to narrow.
