Lower Manhattan may have lagged midtown in its recovery from the pandemic, but New York's downtown office market is showing clear signs of a rebound. Office leasing has “roared back from a dismal 2024,” helping push more office space out of the market at a pace not seen in 25 years, according to a new study.
The neighborhood logged 4.75 million square feet of office leasing in 2025, more than double 2024’s total and “by far the best leasing year” since 2019, according to the Alliance for Downtown New York.
Demand was driven by major deals such as Jane Street’s expansion at Brookfield Place and BNY’s sublease at One World Trade Center, as well as a fivefold increase in relocations to the district, totaling 592,000 square feet. The alliance defines Lower Manhattan as the area south of Chambers Street.
“This past year of leasing has been dramatic given the depressed leasing totals following 2020,” the report said, noting that four of the previous five years failed to surpass 3 million square feet of activity. The district posted its lowest leasing total on record in 2024, at 2.2 million square feet. “2025 delivered a pleasant surprise to the district — so much so that leasing has risen to pre‑pandemic levels,” the alliance said.
Despite the rebound, Lower Manhattan’s overall office vacancy rate ended 2025 at 22.2%, which the report said “remained close to historic highs.” That likely reflects “an ongoing preference for high‑quality, amenity‑rich buildings close to major transit lines.”
Class A office vacancy fell to 21.1%, underscoring the flight‑to‑quality trend that continues to give stronger properties an edge in the market.
Improved leasing downtown, combined with a surge in office‑to‑residential conversions, resulted in Lower Manhattan’s eighth straight quarter of positive net absorption. Net absorption, or the net change in space office occupied, totaled 2.02 million square feet in 2025, the first time in 25 years it has exceeded 2 million square feet, the alliance said. The district's net absorption was boosted by the elimination of office space from the market when it was removed to be converted into residences.
“Conversions continue to shrink office inventory,” the study found. Over the past two years, 14 new conversion projects have been announced, accounting for at least 3,200 residential units. Those projects have also helped drive the neighborhood’s office vacancy rate lower for a seventh straight quarter.
The wave of conversions has also fueled population growth downtown.
Lower Manhattan’s estimated residential population surpassed 70,000 for the first time in 2025, including an increase of 3,900 residents last year alone, according to the study. There’s no slowing sign of the area’s transformation from a traditional 9‑to‑5 business hub into a 24/7 livable domain: The district has 8,987 residential units planned or under construction, with 68% tied to conversion projects.
Financing activity points to lender confidence in the conversion trend. For instance, a project at 101 Greenwich St. involving MetroLoft — one of the city’s most active office‑to‑residential developers — secured a $218 million loan, among a wave of conversion projects that recently landed financing.
Lower Manhattan’s shift toward a mixed‑use neighborhood is also showing up in other sectors as retail openings rose 38% year over year to 90 in 2025, including the U.S. debut of French luxury retailer Printemps. Hotel performance also hit new highs, with occupancy reaching 90% in the fourth quarter, the quarter’s highest mark on record. The average daily room rate climbed to a record high of $384.93 for the year, the study found.
The district’s hotel inventory, now totaling 7,928 rooms across 41 properties at different price points, “should position the market well for this summer’s FIFA World Cup and America 250 celebrations,” the alliance said.