Callahan Capital Partners - Office Real Estate Digest

10/30/2025

Author

Callahan Capital Partners
October 30, 2025

Callahan Capital Partners is a real estate private equity firm and operator focused exclusively on the origination, acquisition and management of high quality office assets in select urban markets throughout the United States.

Here's a glimpse into what we are reading to shape our view on the evolving office market.

"With footprints beginning to expand and little new development, office could be entering an extended period of declining vacancy rates"

The U.S. office market is showing clear signs of recovery as vacancy declined for the first time since 2019, falling to 22.5% in Q3, according to JLL. Gross leasing volume rose 6.5% to 52.4M square feet, with 18 markets surpassing pre-pandemic activity. Leasing growth in the last year has been led by Silicon Valley, San Francisco, and Chicago. Construction has slowed sharply helping stabilize supply. As a result, vacancy for newer Tier 1 buildings has fallen by more than 100 basis points year-over-year. With limited new development and corporate footprints expanding, JLL says office could be entering a sustained period of tightening vacancies. Read more from Bisnow.

“Manhattan leasing activity in 2025 has now surpassed its 2018-2019 levels.”

New York City’s office market is in its strongest upswing in nearly two decades, with 23.2 million square feet leased in the first nine months of 2025—the most for that period in 19 years. Driven by a return-to-office surge, expanding financial and tech tenants, and demand for modern Class A space, Manhattan leasing has now surpassed pre-pandemic levels while the rest of the U.S. remains slightly below. Though vacancy remains elevated at 14.8% and political risks linger, New York has clearly reclaimed its role as the pace-setter for the national office recovery. Read more from the Wall St. Journal here.

“With the Federal Reserve starting to cut interest rates, the property market is showing signs of life. That is especially true in New York where the supply and demand trends are looking good for landlords.”

SL Green Realty is deepening its bet on New York’s office rebound with a $730 million purchase of Park Avenue Tower, a 36-story, 95%-leased Midtown building. The deal, one of the largest office sales of 2025, underscores renewed investor confidence in prime Manhattan assets as leasing strengthens and rates ease. It follows RXR’s $1.1 billion acquisition of 590 Madison Avenue, marking the first billion-dollar New York office sale in nearly three years. Office values remain about 45% below pre-pandemic peaks, enticing buyers back into the market amid signs of price stabilization and Fed rate cuts. SL Green also sold a 5% stake in One Vanderbilt to Japan’s Mori Building, valuing the trophy tower at $4.7 billion. Read more from the Wall St. Journal

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