Key takeaways
- The occupier recovery is real. Manhattan availability is at its lowest since 2020 on both Colliers (12.4%) and CBRE (13.7%) measures, and Midtown’s available supply is back to its March 2020 level. Leasing and shrinking sublease supply appear to have done most of the work.
- Strong income restores access to capital, not its old cost. Fully leased 245 Park Avenue refinanced upward in October, to $2.0 billion at 6.52%, against a combined 4.30% on the debt it replaced.
- Where income fell, legacy loans still need repair. One New York Plaza needed a paydown, a leasing reserve and an extension; Worldwide Plaza, 57% leased, is in foreclosure proceedings.
- What to watch: fourth-quarter availability, the 10-year Treasury yield, and how large 2017–21 financings are resolved at maturity.
The recovery is real
Manhattan’s office market ended the third quarter of 2026 with less space on offer than at any time since mid-2020. Colliers puts availability at 12.4%, with 64.76 million square feet available, the lowest supply since August 2020. It was the tenth consecutive quarter in which availability tightened or remained unchanged. CBRE, which surveys a narrower set of large, fully modernised buildings, puts availability at 13.7%, down 2.9 percentage points in a year and the lowest since the third quarter of 2020.
The figures differ because the two brokers cover different buildings under different rules, not because one is wrong. Neither is a vacancy rate: availability counts space marketed for occupancy within the next year, whether or not it is still occupied, while vacancy counts space that is empty. CBRE’s separate vacancy measure stands at 11.0%.
In Midtown, Colliers reports available supply back to its March 2020 level. Demand has also produced large commitments, among them Anthropic’s 463,000 square feet at 330 Hudson Street. The recovery is not uniform, however: on CBRE’s figures, Downtown leasing ran 26% below its five-year average in the quarter.
What the recovery is made of
Leasing and shrinking sublease supply appear to have done most of the work. Colliers’ available supply has fallen by about 33 million square feet since its February 2024 peak. Conversions to housing have also contributed by taking some buildings off the office market, and because Colliers’ absorption figures count those withdrawals, not all reported absorption is new occupancy.
Momentum is solid rather than accelerating. CBRE’s new leasing excluding renewals is down 5% year to date, while renewals have risen sharply.
Rents need similar care. Colliers’ Manhattan average asking rent is $78.36 per square foot, up 4.6% on a year, and its Class A average is a record $85.45. But asking averages shift with the mix of space on the market, so they are an imperfect guide to what landlords collect. Same-space evidence is stronger: SL Green’s replacement leases in the quarter started 13.6% above the previous escalated rents on the same space, though that is one Midtown-heavy, high-quality portfolio rather than the market.
Leasing also remains expensive. SL Green’s Manhattan office leases signed in the quarter carried an average of 8.2 months of free rent and $85.20 per square foot of tenant improvements, and Avison Young data reported by Commercial Observer show improvement allowances across the market still rising. Filling space takes capital that the most stretched owners may not have.
Where leasing meets the loan
Occupancy matters to a refinancing lender, but what ultimately counts is whether the income it produces can support a new loan at current borrowing costs. Those costs sit far above the levels at which much of Manhattan’s legacy office debt was written. The 10-year Treasury yield was 5.05% on 28 October, against an average of about 1.5% in 2019–21, and the same day the Federal Reserve held its target range at 3.75%–4.00% after raising it by a quarter point in September.
245 Park Avenue shows what a well-leased building can achieve. In October, SL Green and its joint-venture partner refinanced the Park Avenue tower, fully leased at the end of September on SL Green’s figures, with $2.0 billion of five-year, fixed-rate debt at 6.52%. The new loan replaced $1.768 billion of mortgage and mezzanine financing that carried a combined fixed rate of 4.30%, according to SL Green’s filings.
Lenders were willing to lend more against the building, but at a materially higher coupon. The 6.52% is the price of one transaction, not a market-wide Manhattan refinancing rate. The broader point is that strong income restores access to capital, not the cost of capital that prevailed when the old debt was written.
Who still carries the rate shock
The buildings most exposed are not necessarily the weakest. They are those whose income fell while their debt remained sized to earlier valuations and interest rates.
One New York Plaza, a large Downtown tower, carried an $835 million floating-rate, interest-only loan securitised in 2020. Revlon vacated in 2022, and Morgan Stanley used termination options in 2023 to reduce its space. In December 2025, ahead of final maturity, the loan was transferred to special servicing for imminent maturity default, and a November 2025 appraisal put the building’s value 30.5% below its level at issuance. The loan did not refinance conventionally. Instead it was modified, with a $25 million paydown to $810 million, a $20 million leasing reserve, a cash sweep and an extension to January 2028. With those terms in place, it returned to master servicing in May 2026, according to KBRA.
Worldwide Plaza, in Midtown West, shows a harder outcome. It was financed in 2017 with $1.2 billion of mortgage and mezzanine debt and later lost its anchor tenant, the law firm Cravath. SL Green, a minority owner, reports the building 57% leased at the end of September, against 100% occupied when it acquired its stake in 2017. According to a July filing by co-owner New York REIT Liquidating, the first mortgage and both mezzanine loans are in monetary default. The mortgage lender is pursuing foreclosure in court, which appointed a temporary receiver in March, while the senior mezzanine lender, an Extell affiliate, has postponed a separate UCC foreclosure sale several times.
Same recovery, different capital structures: how three Manhattan office loans fared in 2025–26
Illustrative cases, not a representative sample.
| Building | Legacy debt | What changed | Outcome |
|---|---|---|---|
| 245 Park AvenueMidtown (Park Avenue) | $1.768bn mortgage and mezzanine financing, combined 4.30% fixed rate | 100% leased at 30 Sep 2026 | Refinanced and upsized, Oct 2026: $2.0bn, five-year fixed at 6.52% |
| One New York PlazaDowntown | $835M floating-rate, interest-only CMBS loan, 2020 | Revlon left (2022); Morgan Stanley cut its space (2023); special servicing Dec 2025 for imminent maturity default; appraisal 30.5% below issuance | Modified: $25M paydown to $810M, $20M leasing reserve, cash sweep, extended to Jan 2028; back with master servicer May 2026 |
| Worldwide PlazaMidtown West | $1.2bn first mortgage and mezzanine debt, 2017 | Anchor tenant Cravath left; 57% leased at 30 Sep 2026, against 100% occupied in 2017 | All three loans in monetary default; mortgage foreclosure action, temporary receiver appointed Mar 2026; mezzanine UCC sale postponed, not completed |
Note: 6.52% is one transaction’s rate, not a market benchmark. Worldwide Plaza status as disclosed by co-owner New York REIT Liquidating on 28 Jul 2026.
Sources: SL Green Q3 2026 earnings release and supplemental filing (21 Oct 2026); KBRA (12 Feb and 1 Jun 2026); New York REIT Liquidating LLC Form 8-K (28 Jul 2026); Bisnow reporting on Worldwide Plaza’s anchor tenant.
What it means and what to watch
The improving occupier market appears to be making refinancing outcomes increasingly asset-specific. Stronger leasing should help at the margin: it may reduce loss severity, give lenders more reason to extend and make recapitalisations easier to price. It does not, by itself, close the gap between debt sized to earlier valuations and rates and what a building’s income can carry now. Where that gap is small, refinancing can work, sometimes for more money. Where tenant departures have cut income, the likelier paths remain paydowns, extensions, recapitalisations or foreclosure.
That argues against reading the market through building quality alone. All three towers here are large, institutional-grade assets. What appears to separate them is building-specific income, shaped by tenant rollover, and the leverage and valuation against which their debt was sized.
What to watch:
- Fourth-quarter availability. Colliers and CBRE report in early January. The question is whether tightening continues and begins to reach Downtown.
- The 10-year Treasury yield. A sustained move in either direction changes how much debt a given level of income can support.
- Large 2017–21 financings as they mature. Each resolution, whether a refinancing, an extension or a foreclosure, will show how far the leasing recovery is reaching the capital structure.