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AI Drives Manhattan Office Boom Past 20-Year Highs
8 Jul
Summary
- Manhattan office leasing reached 11.02 million square feet in Q2 2026.
- AI leasing volume in Q2 2026 reached 800,000 square feet.
- Class B office buildings show a significant rebound in demand.
Manhattan's office market has demonstrated significant recovery in the first half of 2026, with total leasing volume in the second quarter reaching 11.02 million square feet. This figure represents a 29.4% increase above the five-year quarterly average and marks the first time since 2002 that demand has exceeded 11 million square feet for three consecutive quarters.
The tech and AI sectors are notable drivers of this demand. AI leasing alone surged to 800,000 square feet in the second quarter of 2026, exceeding the total leasing volume from AI firms in Manhattan throughout all of 2025. This robust activity is concentrated in newer, amenity-rich Class A buildings, but a surprising resurgence is also observed in Class B properties.
Analysis from CoStar Group indicates that Class B office leasing in the first half of 2026 was up 14% from pre-pandemic levels and increased by 28% year-over-year. This trend suggests a broadening recovery, with more price-sensitive demand returning to the market. Consequently, availability has narrowed in older buildings, and Class B inventory has achieved a record average asking rent.
