Manhattan's office market experienced a significant uptick in activity at the end of 2024, with landlords and tenants signing 10.2 million square feet of leases in the fourth quarter, marking an 18.3% increase from the previous quarter and the highest quarterly volume in five years. Total leasing for the year reached 33.3 million square feet, a 22.4% increase from 2023. The decline in office availability has prompted landlords to convert buildings to other uses, resulting in nearly 6 million square feet of office space being taken offline.
Demand for high-quality trophy and Class-A office space remains strong, with these categories accounting for over 79% of the leasing volume in Q4, while availability rates for trophy spaces fell to their lowest in three years. Net absorption reached 7.3 million square feet, the highest in a decade, indicating a positive trend for the market.
Midtown emerged as the most active submarket, capturing 77% of the leases signed despite prior doubts about its future due to competition from other areas. However, average asking rents dropped for the sixth consecutive quarter, with the overall average falling to $73.42 per square foot, reflecting the transition of higher-priced spaces being leased out and the introduction of new vacancies at lower prices.
Despite these developments, Manhattan's office supply remains 65% higher than pre-pandemic levels, and a significant amount of commercial mortgage-backed securities tied to office buildings is set to mature in the coming years, indicating lingering vulnerabilities in the market. Ongoing momentum will be critical for recovery in 2025.