Manhattan's Secondary Office Markets Gain Traction as Prime Areas Tighten
Lexington and Third Avenues are experiencing increased leasing activity as companies seek alternatives to costly and scarce prime office space.
Manhattan's office market is witnessing a shift, with secondary corridors like Lexington and Third Avenues seeing accelerated growth as prime office locations become increasingly scarce and expensive. According to JLL data, companies are turning to these areas as availability in prime corridors tightens, pushing rents above $200 per square foot.
Leasing activity on Third Avenue this year is on track to surpass the entirety of its 2025 performance, driven by tenants broadening their searches to escape the current market conditions. The availability rate for trophy office space stands at a tight 4.9%.
Growth on Lexington and Third Avenues
Areas north of 42nd Street on Lexington and Third Avenues have shown the most significant lease count growth between 2021 and 2025, with annual increases of 28.6% and 18.4%, respectively. Third Avenue, in particular, is nearing its total 2025 leasing volume this year.
A significant deal that signaled a shift in the market east of Park Avenue was Bloomberg LP's lease extension and expansion at SL Green's 919 Third Avenue, totaling 750,000 square feet, two years ago. This development has encouraged other tenants to consider these previously less sought-after locations.
“There’s only so much trophy space to go around,” said JLL senior research director Andrew Lim. “Tenants still want a great building, amenities and an owner that’s investing in the property, but because vacancy on prime avenues is so low, they are having to cast a much wider net to find what they need.”
Lim noted that Lexington Avenue has already seen companies relocate from buildings such as 300 Park, 280 Park, and 430 Park to 560 Lexington, with others expanding within the same building. He added that Third Avenue is beginning to experience a similar dynamic, with well-maintained buildings offering attractive options at a different price point.
Notable leases on Third Avenue in 2026 include Kirkland & Ellis's 52,000-square-foot expansion at 900 Third, a new 28,000-square-foot lease for Industrious at 857 Third, and deals for Dutchess Management at 757 Third, as well as transactions at 880, 685, and 950 Third.
Lexington Avenue has also seen substantial activity, with over 110,000 square feet leased this year. This includes deals for Marex and SummitTX at 560 Lexington and leases signed by five law firms and financial groups at 370 Lexington.
Landlords are responding to this increased demand with significant property investments. Waterman Interests and HPS Investment Partners are undertaking an $80 million upgrade of the largely vacant 850 Third Avenue building, which will include a new restaurant space and a relaunch later this year. Furthermore, ongoing residential conversions, such as at SL Green’s 750 Third Avenue, are expected to invigorate the corridor by attracting new residents.