Manhattan’s office market posted 3.87 million square feet of leasing activity in July 2026, a 22 percent increase over June and a 28.4 percent jump year-over-year, according to Colliers’ latest monthly market report. Year-to-date leasing volume has now reached 26.66 million square feet, putting the borough on pace for its strongest annual total since 2000 — a milestone that would cap a recovery arc that seemed nearly unimaginable during the pandemic-era emptying of Midtown towers.
- Available office space dropped to 66.24 million square feet in July, the lowest level since September 2020 and a 32 percent decline from the post-pandemic peak of 98 million square feet recorded in February 2024.
- Sublet inventory also hit its lowest point since August 2019, shrinking by 700,000 square feet in July alone.
- Midtown South accounted for nearly half of all July leasing activity, driven by Anthropic’s 465,630-square-foot full-building lease at 330 Hudson Street.
- NBCUniversal renewed 244,000 square feet at 1221 Sixth Avenue in Midtown; Aon renewed 202,000 square feet at Brookfield’s 1 Liberty Plaza Downtown.
- Average asking rents reached $78.03 per square foot, within 1.8 percent of the $79.47 per square foot recorded in March 2020, just before pandemic shutdowns reshaped the market.
- Manhattan absorbed approximately 5.5 million square feet of office space during the first half of 2026; if that pace holds, pre-pandemic occupancy levels could be within reach in two years.
Midtown South Drives Nearly Half of July’s Demand
The geography of Manhattan’s office recovery has shifted. While Midtown — home to the traditional corporate towers along Park Avenue, Sixth Avenue, and the Plaza District — has historically anchored leasing volume, July’s numbers were dominated by Midtown South, the submarket stretching from 40th Street to Canal Street that has become the center of gravity for technology, media, and artificial intelligence tenants.
Midtown South captured 1.9 million square feet of the month’s total — nearly half of all Manhattan leasing — despite representing just 36.3 percent of the borough’s office inventory. The outsized share was boosted by the month’s single largest transaction: Anthropic’s lease for the entirety of AEW Capital Management’s 330 Hudson Street, a 16-story building in the Hudson Square neighborhood. The AI company, which builds the Claude chatbot, plans to double its New York City workforce to roughly 1,000 employees by year-end 2026, with the building capable of seating 1,700 workers at full capacity.
Frank Wallach, executive managing director for research and business at Colliers, noted that Midtown South’s availability rate dropped by about half a percentage point in July alone, falling to 12.2 percent. That kind of single-month compression is unusual for any submarket and signals that tenants are committing to space faster than new inventory is entering the pipeline.
Since Midtown South’s post-pandemic supply peak in November 2023, available inventory in the submarket has been cut by 36.2 percent. Midtown and Lower Manhattan have tracked similar declines over the same period. All three submarkets have seen their available space shrink by roughly a third from their respective post-pandemic highs — a convergence that Wallach called remarkable given how differently the three markets function.
AI Leasing Reshapes the Tenant Mix
Artificial intelligence companies have emerged as a structural force in Manhattan office demand, not merely a cyclical boost. AI tenants accounted for more than a third of the technology sector’s leasing activity in the first quarter of 2026, absorbing 670,000 square feet — a sharp increase from the sector’s 12 percent share in 2025, according to Colliers. By the second quarter, AI leasing volume climbed further to 800,000 square feet, surpassing the combined total for all AI deals in Manhattan throughout 2025.
The concentration of AI activity in Midtown South and Lower Manhattan reflects a pattern familiar from the late-1990s dot-com era, when internet companies briefly captured a quarter of all Manhattan office leasing. But the current AI wave is still comparatively small. AI firms represent roughly 2 to 3 percent of total Manhattan leasing by volume, even as their growth rate commands outsized attention. The difference now is that AI companies tend to lease large, contiguous blocks of Class A space with long-term commitments, which tightens availability at the premium end of the market and pushes other tenants into Class B and Class A-minus buildings that had struggled to attract demand in recent years.
Beyond Anthropic, the AI pipeline in Manhattan includes OpenAI’s presence at the Puck Building in SoHo, EliseAI’s 109,000-square-foot lease at 401 Fifth Avenue near Grand Central, and legal AI startup Harvey’s 185,000-square-foot commitment at One Madison Avenue. These deals collectively signal that New York’s talent pool — particularly its density of finance, legal, and media professionals who are early enterprise AI adopters — is pulling companies east from San Francisco.
Rents Approach Pre-Pandemic Levels but Full Recovery Remains Uncertain
The rental picture reinforces the recovery narrative, with some caveats. At $78.03 per square foot in July, Manhattan’s average asking rents sit just 1.8 percent below the $79.47 recorded in March 2020. Midtown South has already surpassed its pre-pandemic rent levels, driven by constrained supply and premium demand from technology and AI tenants.
The broader question is whether absorption can sustain its current trajectory. Manhattan absorbed roughly 5.5 million square feet of office space during the first six months of 2026, according to Colliers. If that pace continues, the market could return to March 2020 occupancy levels within two years. But Wallach cautioned that maintaining the current rate of absorption presents a challenge, particularly as the large-block leases that have powered 2025 and 2026 become harder to replicate in a market where premium inventory is increasingly scarce.
Office-to-residential conversions have also removed some supply from the pipeline, contributing to tighter availability. However, that trend has slowed in recent months amid increased city scrutiny of building conversion projects, adding another variable to the supply equation.
The Sublease Market Tells Its Own Story
One of the clearest indicators of office market health is the sublease pipeline — space that tenants have leased but are trying to offload because they no longer need it. In July, Manhattan’s sublease inventory shrank by 700,000 square feet, reaching its lowest level since August 2019. The decline was driven in part by Snap’s 199,000-square-foot sublease at Vornado’s Penn 2, which absorbed a notable block of space that had been sitting on the market.
The sublease overhang was one of the most visible symptoms of the post-pandemic office crisis. At its peak in late 2022, sublease inventory across Manhattan exceeded 22 million square feet. It has since been cut by more than half, and all three major submarkets — Midtown, Midtown South, and Downtown — recorded reductions in sublease inventory during July.
The shrinking sublease market removes a key source of discount pricing that tenants used to negotiate below-market deals during the pandemic recovery. As that leverage evaporates, landlords are regaining pricing power — a dynamic reflected in the steady upward movement of average asking rents across the borough.
FAQs
How Does Manhattan’s 2026 Office Leasing Compare to Pre-Pandemic Levels?
Year-to-date leasing volume through July 2026 reached 26.66 million square feet, a 12.8 percent increase over the same period in 2025. If this pace holds, 2026 would be Manhattan’s strongest leasing year since 2000. Average asking rents at $78.03 per square foot are within 1.8 percent of March 2020 levels.
Which Companies Signed the Largest Manhattan Office Leases in July 2026?
Anthropic’s 465,630-square-foot lease at 330 Hudson Street in Hudson Square was the month’s largest deal. NBCUniversal renewed 244,000 square feet at 1221 Sixth Avenue, and Aon renewed 202,000 square feet at 1 Liberty Plaza in Lower Manhattan.
What Role Are AI Companies Playing in Manhattan’s Office Recovery?
AI firms leased 670,000 square feet in the first quarter of 2026, more than a third of all technology-sector leasing and a sharp increase from their 12 percent share in 2025. By the second quarter, AI leasing volume rose further to 800,000 square feet, exceeding all AI leasing in Manhattan throughout 2025 combined.
How Much Available Office Space Remains in Manhattan?
Manhattan had 66.24 million square feet of available office space in July 2026, the lowest level since September 2020. That figure is down more than 32 percent from the post-pandemic peak of 98 million square feet recorded in February 2024. Sublease inventory has also hit its lowest point since August 2019.
