On a Tuesday in late May, Simpson Thacher & Bartlett signed a 916,000-square-foot lease at Extell's 570 Fifth Avenue. The law firm committed to a tower still under construction, with delivery scheduled for 2028. It was Manhattan's second-largest lease this year and 200,000 square feet larger than previously reported.
The deal capped a month that pushed Manhattan's office market toward its best year since 2000. Tenants leased 4.2 million square feet in May, up 17 percent from April and 35 percent year-over-year, per Colliers. Year-to-date volume reached 19.6 million square feet, 10 percent ahead of the same period last year.
May's leasing was concentrated in a handful of large transactions. Google renewed 411,000 square feet at Jack Resnick & Sons' 315 Hudson Street. Versant renewed and expanded by 249,000 square feet at Columbia Property Trust's 229 West 43rd Street. These three deals accounted for 1.6 million square feet, or 38 percent of monthly volume.
The surge in demand absorbed available space at the fastest rate since the pandemic. Manhattan's availability rate fell to 13.2 percent, down from April. Available inventory dropped to 69.2 million square feet, the lowest since October 2020 and nearly 30 percent below the post-pandemic peak of 98 million square feet. Sublease space shrank 25 percent year-over-year.
Midtown drove the recovery. The submarket accounted for more than half of all May leasing activity. Volume nearly doubled from April and from a year earlier, fueled by the Simpson Thacher deal. Midtown South posted leasing volume well above its ten-year average, though down from April. Downtown availability tightened despite a slowdown in deal volume from April, which had been boosted by Cleary Gottlieb's large lease.
Landlords regained pricing power. Manhattan's average asking rent rose to $77.76 per square foot, the highest since August 2020 and nearly 6 percent higher than a year ago. The rent increase reflects both the flight to quality and the shrinking supply of prime space.
The arithmetic is straightforward. At the current year-to-date pace of 3.9 million square feet per month, 2026 would finish at roughly 47 million square feet. That would surpass 2019's 44 million square feet and approach 2000's 51 million square feet. The trajectory depends on whether large-block demand persists through the second half.
The Simpson Thacher lease is instructive. The firm committed to a building that does not exist yet, paying a premium for new construction in a market where 1970s towers sit half-empty. That bifurcation is the defining feature of this cycle. Tenants want modern floor plates, higher ceilings, better air filtration, and proximity to transit. Buildings that cannot deliver those features are being left behind.
The availability rate of 13.2 percent masks a deeper divide. Colliers data shows that Class A availability in prime Midtown towers is below 10 percent, while Class B and C buildings in secondary locations exceed 20 percent. The aggregate number smooths over the gap, but the gap is where the distress lives.
Lenders are watching the same data. A market that absorbs 69.2 million square feet of available inventory and pushes rents above $77 is a market where refinancing risk recedes for well-located assets. But the recovery is not uniform. Buildings that cannot attract tenants at those rents will face valuation resets when their loans mature.
The May numbers confirm that Manhattan office demand is real, concentrated, and driven by the largest employers. Law firms, tech companies, and financial institutions are making long-term commitments to space they believe will attract and retain talent. The question for the second half of 2026 is whether the middle market follows.