Manhattan's available office supply just fell to its lowest level since 2020 and asking rents jumped in a single quarter. Inside the buildings, employees still come in less often than their employers plan for, and the gap is turning into a real estate cost question.
Key Takeaways
For most of the last six years, the office market gave occupiers the upper hand. Space was abundant, landlords competed on concessions, and a company unsure about its future headcount could sign short, cheap, and late. New third-quarter data out of Manhattan suggests that window is closing in the country's largest office market, and it is closing before most companies have settled how often their own people will actually use the space they are paying for.
According to Colliers figures reported by Commercial Observer on October 1, Manhattan tenants signed 10.06 million square feet of leases in the third quarter, beating both the five-year and ten-year quarterly averages. It was the first time since 2002 that leasing topped 10 million square feet in four consecutive quarters. Available supply fell to 64.76 million square feet, the lowest level since August 2020, and average asking rents climbed to $85.08 per square foot from $78.03 one quarter earlier. Franklin Wallach, executive managing director at Colliers, said the recovery “continued at a rapid pace throughout the summer and into the early days of autumn.”
What makes the numbers notable is the backdrop. Commercial Observer's weekly market summary described the quarter as roughly 19.2% above the ten-year leasing average, achieved despite disappointing employment numbers and elevated Treasury yields. Demand is not coming from a hiring boom. It is coming from companies concentrating into better buildings and from new categories of tenant. Among the quarter's five largest deals was Anthropic, the AI developer, taking 465,630 square feet at 330 Hudson Street, alongside law firms Proskauer Rose and Morgan, Lewis & Bockius and media companies NBCUniversal and Havas Health.
That pattern matches national research. JLL's July analysis of AI and real estate found that U.S. tech employment declined 1.5% in early 2026, yet office leasing demand from the sector kept rebounding. In San Francisco, nearly 30% of total leasing since 2025 has come from AI companies. Alexandra Bryant, JLL's global CEO of Value & Risk Advisory, said the winning strategies “will be those that look beyond the headlines about job losses and focus on a market and industry's ability to adapt.”
For an operations or finance leader with a lease event in the next two years, the practical consequence is simple. In the tightest markets, the cost of waiting is rising, and the best space is going first. The harder question is how much space to commit to, and that depends on data most companies have not yet reconciled.
CBRE's 2026 Americas Office Occupier Sentiment Survey, as summarized by Yahoo Finance, shows how far mandates have moved. Eighty-nine percent of employers now require at least three days of office attendance per week, up from 78% in 2025, and the share expecting only one or two days fell to 11% from 23%. Yet average attendance of 2.9 days still lags the employer target of 3.2 days. Policy has tightened faster than behavior, which means many portfolios are sized for a week that does not quite happen.
The same survey suggests the shortfall is partly the office's own fault. Nearly half of organizations (47%) rate their current workplace experience as insufficient, but only 14% are pursuing meaningful reinvention, while 54% are making incremental improvements. The top factors limiting attendance are an inconvenient location (62%) and a lack of amenities (53%). The biggest draw is colleague engagement, cited by 77%. People come in to work with each other, and when the building or the schedule makes that hard, they come in less.
Portfolio plans have shifted accordingly. Two-thirds of organizations (66%) plan to maintain or expand their space over the next three years. Among large organizations, 46% plan to reduce space, down from 60% a year earlier, and in tech 64% plan to expand, up from 41%. Meanwhile, 84% of respondents are pursuing some form of flexible space. Companies are hedging: holding a core footprint while keeping part of their capacity flexible.
There is a newer variable in these decisions. CBRE finds 23% of organizations say AI is already influencing space planning, and another 30% expect a meaningful impact within two years. Nearly half do not expect AI to affect their space plans anytime soon. The risk is in the middle: a company that trims its footprint on projected AI headcount savings may be acting on expectations rather than results. JLL's data counsels caution here. Only 5% of 2025 job cuts identified AI as a primary driver, and 60% of companies globally still plan to grow their workforces over the next three to five years.
None of this argues for signing big. It argues for sizing the core lease to the attendance and headcount a company can actually measure today, and buying optionality for the rest.
The office market is regaining pricing power faster than companies are regaining full buildings. The occupiers that come out ahead will be the ones that know their real utilization, commit only to what it supports, and keep the rest flexible.
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