February 12, 2025

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New York City office demand is back to normal at last

Demand for office space in New York City has fully rebounded to pre-pandemic levels, driven by a combination of new workers entering the market and employers pushing for a return to the office.

According to VTS, which tracks demand through unique new tenant tours of properties, office demand in the city surged by 25% in the fourth quarter compared to the previous year. This metric serves as an early indicator of new leasing activity.

“New York City’s return to in-office work reflects the city’s unique cultural and economic characteristics, particularly within the finance and tech sectors,” said Nick Romito, CEO of VTS, in a news release.

SL Green Realty Corp, a real estate investment trust (REIT) focused on Manhattan office and retail properties, recently reported its earnings. While it fell short of revenue expectations, analysts noted a continued tightening in the office market as leasing demand picks up.

Marc Holliday, CEO of SL Green, highlighted that the city’s Office of Management and Budget projects approximately 38,000 new office-related jobs in 2025, primarily within finance, business services, and information technology sectors. “This translates to millions of square feet of absorption, and most of those new workers will not be remote,” Holliday said. “Along with rising in-office attendance as companies require employees to return more frequently, we expect strong demand for office space throughout 2025.”

SL Green ended the year with 92.5% occupancy and projects occupancy to surpass 93% in the coming year.

Tech giant IBM recently expanded its lease with SL Green at One Madison Avenue by 92,663 square feet, bringing its total footprint at the property to over 362,000 square feet. “This expansion at One Madison Avenue underscores our commitment to advancing the tech sector in New York City and New York State,” said Joanne Wright, IBM’s senior vice president for transformation and operations.

While New York City is the leader in the office recovery, other markets are showing signs of improvement as well. San Francisco experienced a 32% annual growth in demand, surpassing New York’s growth rate, although it started from a lower base. Seattle and Chicago saw demand increase by around 15% each, as employers in those cities increasingly adopt hybrid work models that require consistent in-office presence.

“The data shows that while markets like New York City are rapidly returning to traditional office settings, the national trend reflects slow but steady progress,” said Ryan Masiello, chief strategy officer at VTS.

Nationally, demand in the fourth quarter increased by 12% compared to the previous quarter, defying the usual seasonal decline. “This growth is significant—not just for defying seasonal trends but for emerging amid a cooling labor market,” Masiello added. “It suggests that businesses are becoming more confident and investing in office space with a long-term perspective, despite economic uncertainties.”