The demand for office space in New York City has rebounded to pre-pandemic levels, driven by a combination of an influx of new workers and employers’ efforts to bring employees back to the office. This surge in demand signals a significant shift in the city’s commercial real estate market, with signs pointing toward continued growth in 2025.
Strong Demand Growth in the Fourth Quarter
According to data from VTS, a leading provider of real estate analytics, office demand in New York City surged by 25% in the fourth quarter compared to the previous year. This growth is measured by unique new tenant tours of office properties, a key early indicator of leasing activity. The surge in demand reflects a broader trend as businesses increasingly call employees back to the office.
Nick Romito, CEO of VTS, emphasized that this shift back to in-office work is influenced by New York City’s unique cultural and economic dynamics, particularly in key sectors such as finance and technology. He stated, “New York City’s shift back to in-office work reflects the city’s unique cultural and economic dynamics, especially in the finance and tech sectors.”
SL Green Realty’s Performance and Future Outlook
SL Green Realty Corp, a major player in Manhattan’s office and retail real estate market, recently released its earnings report, highlighting the continued tightening of the office market. Although the company fell short of revenue expectations, analysts pointed to the accelerating leasing demand, signaling stronger future performance.
During a call with analysts, SL Green CEO Marc Holliday discussed the city’s projected job growth, noting that the Office of Management and Budget forecasts the addition of about 38,000 new office-using jobs in 2025. These positions, primarily in finance, business services, and information technology, are expected to drive millions of square feet of new office space absorption. Holliday emphasized that the majority of these new workers will not be working remotely, further fueling the demand for office space.
Holliday also pointed out that SL Green’s occupancy rate ended 2024 at 92.5%, with projections to surpass 93% leased occupancy in the coming year. This reflects a positive trend in leasing activity as businesses increasingly seek office space in New York City.
IBM Expands Its Footprint in the City
One notable development is IBM’s recent lease expansion at One Madison Avenue, where the tech giant signed a 92,663-square-foot expansion. This brings IBM’s total footprint at the property to more than 362,000 square feet. Joanne Wright, IBM’s Senior Vice President for Transformation and Operations, stated, “The expansion of IBM’s flagship office at One Madison Avenue reaffirms a long-standing commitment to advance the technology sector in New York City and New York State, with a vibrant and collaborative workspace designed to bring employees, clients, and partners together from around the world.”
This expansion highlights the growing confidence in New York City’s office market, particularly in the technology sector.
Other Markets Showing Improvement
While New York City leads the recovery, other markets are also experiencing growth. San Francisco, for example, saw a 32% annual growth rate in demand, a faster rate than New York’s, although it started from a much weaker position. Other cities like Seattle and Chicago saw growth rates of approximately 15%, with employers in those areas increasingly adopting hybrid work models that require consistent in-office presence.
Ryan Masiello, Chief Strategy Officer of VTS, noted that while cities like New York are rapidly returning to traditional office environments, the broader national picture reflects slow but steady progress. He stated, “The data shows that while some markets, like New York City, are rapidly returning to traditional office settings, the national picture reflects slow but steady progress.”
National Outlook and Market Trends
Nationally, demand for office space in the fourth quarter increased by 12% compared to the previous quarter. Historically, demand tends to decline during this period, but the data defied seasonal expectations.
This growth is especially significant given the cooling labor market, suggesting that businesses are more willing to invest in office space despite ongoing economic uncertainty. Masiello added, “This growth is notable — not only for defying seasonal expectations, but for emerging in the midst of a cooling labor market. Businesses appear more willing to invest in office space despite economic uncertainty, signaling a shift in confidence and long-term planning.”
Conclusion
The return of office space demand to pre-pandemic levels in New York City is a clear sign of recovery in the commercial real estate market. With key sectors like finance and tech driving demand, along with an influx of new jobs and the growing trend of employees returning to the office, the outlook for the office market in 2025 looks promising. As the demand for office space accelerates, the broader national market is also showing signs of steady recovery, reinforcing a sense of confidence in the future of commercial real estate.