Manhattan's office leasing market experienced its strongest growth in more than 20 years during the second quarter of 2026, with 11.02 million square feet leased—29.4% above the five-year quarterly average and 31.3% above the 10-year average, according to Colliers. This marked the first time since 2002 that demand for office space exceeded 11 million square feet for three consecutive quarters. Overall, the first half of 2026 saw the highest office leasing demand in over two decades, while supply remained tight or stable.

Key industries such as technology, artificial intelligence, legal, media, and financial services have driven this increased demand, with significant leasing activity spread throughout Manhattan. Frank Wallach, Colliers’ executive managing director of research, noted that these sectors, combined with companies relocating from buildings being converted to non-office uses, have jointly fueled strong leasing momentum. Meanwhile, asking rents posted the largest mid-year growth since 2016.

The AI sector notably expanded its footprint, leasing 800,000 square feet of office space in Manhattan during the second quarter, surpassing all AI leasing signed in 2025. Both Manhattan and San Francisco are seeing notable gains in AI-driven office leasing, while other U.S. markets continue to struggle. There is a clear preference for newer, amenity-rich Class A buildings, though older office properties are more frequently being converted to residential or hospitality uses, a process that remains gradual.

Interestingly, Manhattan is witnessing a resurgence in demand for Class B office buildings, which accounted for 45% of leasing in the first half of 2026, up from 43% before the pandemic. Leasing activity in Class B space is now 14% higher than pre-pandemic levels and 28% above last year, signaling broader market recovery beyond just premium properties. Availability in older buildings has tightened, and Class B asking rents reached record highs by mid-2026, suggesting more mid-market tenants are returning to the Manhattan office leasing market.