September 21, 2026
Office usage across ten major cities reached a postpandemic high of roughly 67 percent this year, according to a Kastle Systems index, with badge swipes at prime buildings coming within 10 percent of prepandemic norms on busy days, per Barron’s. Manhattan leads the trend, and the leasing data behind it is hard to dismiss.
The recovery is real. It is also narrower than the headline number suggests, and the gap between where demand is strong and where it is not is the part that matters for valuation work.
Supply is not coming
National office space is shrinking. Cushman & Wakefield reports just 19.7 million square feet of office space under construction nationally, close to the lowest level on record. Older buildings are being demolished or converted to housing and other uses rather than replaced, while tenants are absorbing the most space since 2020.
In Manhattan, the shortage is concentrated at the top of the market. JLL reports that of the 7.7 million square feet of prime office space currently under construction, more than 80 percent is already leased. As of the second quarter, Midtown West had no direct vacancies in top-market buildings, and options were similarly limited in the Meatpacking District and Hudson Yards, where Class A direct vacancy sits at 1.4 percent and 4.9 percent respectively.
Prime office space in Manhattan now leases for roughly $95 per square foot, up 6 percent from prepandemic levels, against a citywide average of $84. Premier space tops $300 per square foot in some buildings, according to JLL. Rent varies sharply by submarket: Tribeca’s average Class A asking rent runs $168 per square foot against 14.5 percent total vacancy, while Hudson Square runs closer to $103 per square foot with total vacancy above 16 percent.
Demand is coming from a specific set of tenants
Growing startups, artificial intelligence firms, and employers consolidating hybrid schedules are competing for the same shrinking pool of high-quality space. Anthropic’s expansion illustrates the scale: the company signed a long-term lease this summer for a 16-story building in downtown Manhattan with capacity for 1,700 desks, more than triple its New York headcount at the start of the year, according to a company spokesperson cited by Barron’s.
CBRE’s head of U.S. office research points to a straightforward supply and demand mismatch, noting that the pipeline coming online over the next 24 months falls well short of demand at the top of the market. The postpandemic construction shutdown and the conversion of older buildings to other uses are cited as the two main drivers.
Office REIT valuations have not caught up
Leasing fundamentals at top buildings have improved, but office REIT share prices have not followed. SL Green is trading 46 percent below its 2019 level despite reporting its best year since 2024. BXP is down 53 percent from 2019. Hudson Pacific Properties, which combines office and film studio space on the West Coast, is down 95 percent from 2019, even after a 13 percent gain this year, its best performance since 2019. Based on expected 2026 funds from operations, a common REIT earnings metric, all three trade at price multiples below their prepandemic levels.
Analysts point to leasing momentum, not interest rate cuts, as the more immediate driver of REIT performance from here, according to Green Street’s head of office and life science research. Risks to that view include a recession or a further rise in interest rates, which would raise refinancing costs for REITs holding debt secured before or during the pandemic.
What this means for valuation work
The recovery in office fundamentals is not evenly distributed, and applying a national or even a citywide trend to a specific asset risks missing the difference that matters most: building class, submarket and construction vintage.
A prime, well-located tower with modern infrastructure is operating in a genuinely different market than an older building a few blocks away, even within the same city. Valuing office property in this environment requires evaluating a building’s specific competitive position and submarket vacancy and rent data, not a citywide leasing average, since the recovery documented in Manhattan and similar top-tier markets does not extend uniformly to older or lower-tier office stock.
Source: Shaina Mishkin, “The Office Boom Is Back. Can REITs Be Far Behind?” Barron’s, September 15, 2026.
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