Manhattan’s office leasing market is experiencing a notable shift as demand extends beyond traditional prime locations, with Midtown Lexington Avenue and Third Avenue emerging as increasingly attractive options for tenants. According to recent data from JLL, the scarcity of trophy office space and soaring rents in core corridors are prompting companies to broaden their searches to adjacent areas.
Leasing activity along Third Avenue in Midtown is on pace to surpass projected totals for 2025, fueled by growing tenant interest in spaces north of 42nd Street. Between 2021 and 2025, lease counts increased annually by 28.6% on Lexington Avenue and 18.4% on Third Avenue, indicating robust growth in these markets. The overall availability of premium office space remains tight, with vacancy rates for trophy properties around 4.9% and rents exceeding $200 per square foot in Manhattan’s most sought-after districts.
A key turning point for Third Avenue came with Bloomberg LP’s decision two years ago to not only renew but expand its lease by an additional 175,000 square feet at SL Green’s 919 Third Avenue. This high-profile deal is credited with increasing market confidence in the corridor. JLL Senior Research Director Andrew Lim noted that while tenants continue to prioritize high-quality buildings with strong amenities and committed landlords, limited options in prime avenues are encouraging companies to consider alternative locations.
Several notable leases along Third Avenue in 2026 include Kirkland & Ellis’s expansion by 52,000 square feet at 900 Third Avenue and new agreements by Industrious at 857 Third Avenue and Dutchess Management at 757 Third Avenue. Other activity has been recorded at 880, 685, and 950 Third Avenue. Meanwhile, Lexington Avenue has recorded over 110,000 square feet leased this year, including transactions involving Marex and SummitTX at 560 Lexington, as well as multiple law firms and financial institutions at 370 Lexington.
Property owners are responding to these shifts with significant investments. For instance, Waterman Interests and HPS Investment Partners are conducting an $80 million renovation of 850 Third Avenue, a mostly vacant building that recently secured a lease for a 4,500-square-foot restaurant operated by the Kellari group. The renovated property is expected to re-enter the market later in 2026. Residential conversions, such as SL Green’s project at 750 Third Avenue, are also underway, likely to add new residential tenants and invigorate the corridor.
Meanwhile, in the Bronx, real estate firm Himmel + Meringoff (H+M), along with partner Affinius Capital, is preparing to sell a large development site at 1601 Bronxdale Avenue near the forthcoming Parkchester/Van Nest Metro-North station. The 7.4-acre parcel, acquired in 2019, has received full city approvals for a mixed-use project comprising six buildings totaling approximately 2.41 million square feet. Plans include up to 2,300 residential units alongside retail and community spaces, 640 parking spots, and a direct pedestrian link to the new transit hub.
Currently leased to industrial and commercial tenants—including a 354,000-square-foot industrial building with office space—the property is generating steady cash flow. The owners have engaged BKREA to market the site, targeting a sale price near $120 million, up from the $89 million purchase price five years ago. BKREA CEO Bob Knakal highlighted the unique combination of scale, operating income, large land area, transit access, and housing potential as key attributes that make the Bronxdale site a rare opportunity in New York’s competitive real estate market.