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Tales from New York’s cautious office comeback
October 1, 2025
Institutional investors still avoid broad bets on the sector, but painstakingly selected niches are doing well
Marx Realty’s 35-story building at 10 Grand Central is nearly full. Craig Deitelzweig, Marx’s CEO, did a multi-million-dollar renovation, adding hotel-like amenities to the drab office that used to go by 708 Third Avenue. Tenant demand is now so furious Deitelzweig raised rents four times in the past year.
“It’s one of the strongest office markets that we’ve seen in a decade,” he said.
Not all New York City office dealmakers will make a claim like that, but most will acknowledge the comeback in a sector that descended into the edges of hell during Covid only to remain in purgatory for years.
Earlier this year, New York City recorded the lowest office vacancy rate of any major city, according to Moody’s. Foot traffic has exceeded pre-pandemic numbers, Placer.ai data shows. And new leasing in Midtown rose to 5.3 million square feet in the second quarter, its highest mark since 2019, according to a report from Cushman & Wakefield.
News from the leasing market has spurred big-ticket deals. RXR’s recent purchase of 590 Madison Avenue, a 1 million-square-foot tower formerly home to IBM, was the first sale of over $1 billion since 2022.
“590 Madison was finally the culmination of all the trends that we were seeing and the conversations we’ve been having that the market was finally ready to get a billion-dollar-plus single asset sale done,” said Gary Phillips, managing director of Eastdil Secured, who brokered the deal.
Another sign of a comeback: Blackstone is looking at the sector. When Jon Gray and the trillion-dollar Blackstone operation put their money into something, others follow. In June, the firm made one of its first moves into office since Covid, acquiring a large stake in Fisher Brothers’ 1345 Sixth Avenue. It also bid on 590 Madison and on Paramount Group, the New York City and San Francisco office landlord with 13 million square feet of Class A office space that reached a deal to sell to Rithm Capital in September.
Meanwhile, Related Companies might build a new office at 625 Madison Avenue, where it had planned a 1,220-foot, 68-story supertall with residential, hotel and retail. The pivot would be to an “AA-class office tower.”
Padding the environment, the Federal Reserve finally lowered the federal funds rate in September, while suggesting future rate cuts. CBRE already expects an uptick in deals.
But the scope of the office comeback is unclear. Institutional investors are still not making broad bets on office, but are surgically picking spots in sub-markets within a sub-market. At the same time, an untold amount of distress is playing out behind the scenes with lenders.
“I’d say it’s early days of a recovery in office,” said Spencer Garfield, co-head of CRE credit at Fortress Investment Group. “But that recovery is underway, and there’s still pain to be had, because there are still over-levered properties, and there are still poorly run properties and undercapitalized sponsors.”
Return journey
New York City’s office comeback story started with leasing.
With new construction virtually stopped and the trophy towers of One Vanderbilt, Hudson Yards and Manhattan West filled up, companies searching for space looked elsewhere.
They first turned to Park Avenue because of its close proximity to Grand Central, which seemed more convenient than ever for employees returning to the office, especially from the Northern suburbs. With its historic reputation as the premier office address, vacancy rates for Park Avenue declined to less than 10 percent in 2024, far below the city’s average, according to CoStar.
Park Avenue building owners opted to spend tens of millions on amenities and upgrades.
Aby Rosen’s RFR Holdings put about $30 million into the Seagram Building, considered the Rolls-Royce of buildings when it was built in the late ’50s. It’s now fully occupied, averaging leases in the mid-$200s per square foot. Some tenants at Seagram are making forward commitments for 2027 and 2028, son Gaby Rosen noted, because of concerns about finding space in the area.
“Even though the overall market availability rate is still relatively very high, there is a lack of supply of big block space,” Gaby Rosen of RFR said. “And there happen to be 30 to 40 tenants right now in the market looking for big block space in and around Grand Central and Midtown East.”
Such tenants scour Midtown for buildings with their desired amenities, including modern lobbies, high ceilings and spacious conference rooms. Options have been limited. Amazon, which needed to find a place for its 350,000 corporate employees returning to the office, inked a 330,000-square-foot lease at Property & Building Corp’s 10 Bryant Park, a 1980s office tower with extensive upgrades. It also enlisted WeWork to lease even more space on its behalf.
“There happen to be 30 to 40 tenants right now in the market looking for big block space in and around Grand Central and Midtown East,” said Aby Rosen of RFR.
Yet institutional investors remained on the sidelines. No one wanted to be the first mover, and other business lines, such as private credit, offered returns of over 15 percent, too lucrative for investment giants to pass up.