Vornado Realty Trust reported that 2025 was its most active year for Manhattan leasing in more than a decade, with approximately 3.7 million square feet signed across the borough and office occupancy approaching the low 90% range. Executives attributed much of the activity to leasing in the redeveloped Penn District, particularly at PENN 2. The company also cited a $218 million acquisition on Fifth Avenue and a series of planned redevelopment projects as part of its current investment strategy in the Manhattan office market.
On the company’s Feb. 10 earnings call, detailed in a transcript on The Motley Fool, management said Vornado leased 4.6 million square feet of office space in 2025. About 3.7 million square feet of that was in Manhattan, which the company said was its highest total there in more than a decade. PENN 2 alone accounted for roughly 908,000 square feet of the action, with average starting rents at about $109 per square foot for the building and $114 per square foot on the 231,000 square feet signed in the fourth quarter. Executives added that leased occupancy across the office portfolio has climbed to about 91%, and they told investors they expect to finish leasing up PENN 2 in the coming year.
PENN 2 Is The Engine
Inside Vornado headquarters, PENN 2 is getting star treatment as the engine of the company’s recovery. The renovated tower perched above Penn Station has become the poster child for the strategy of pouring money into well-located, transit-rich buildings and then charging top-tier rents.
"We have the Penn District, our city within a city," CEO Steven Roth said, leaning into the branding on the call. He later told investors that New York is "on the foothills of the best landlord's market in 20 years," according to an earnings transcript posted by Investing.com. Roth and his lieutenants argued that the balance of power has shifted, with landlord leverage pushing starting rents in the best buildings well above pre-pandemic levels.
Citywide Leasing Surge
Vornado is not riding this wave alone. The company’s results landed in the middle of a broader Manhattan leasing surge that has landlords across the borough suddenly breathing a lot easier.
As reported by CoStar, demand for top-tier space accelerated last year, with tenants crowding into renovated and newly built towers even as older offices sat on the sidelines. A JLL study cited in industry reporting found a record number of Manhattan leases starting at $100 per square foot or higher, a threshold that used to be reserved for only the splashiest addresses.
Colliers data, reported by CNBC, showed Manhattan leasing through October had already surpassed the full-year 2024 total and suggested annual volume could top 40 million square feet. That would put the market on track for its strongest year since 2019, a pre-pandemic high-water mark many in the industry were not expecting to see again so soon.
Vornado’s Fifth Avenue Bet
Vornado is also making a high-profile bet a few blocks uptown. In September the company paid $218 million for the office condominium above Saks at 623 Fifth Avenue, and it plans to turn the mostly empty floors into what management calls a high-end boutique office.
The redevelopment will not be cheap. Vornado estimates costs at roughly $1,200 per square foot, including tenant concessions, and has told investors the project could add about $0.11 to per-share profit once it stabilizes. CEO Steven Roth called the purchase "the best deal ever," according to CoStar. The company says it aims to deliver the reworked space to tenants by the end of 2027, just in time to find out whether tenants are still willing to pay up for shiny Fifth Avenue views.
Recent leasing data indicate a shift away from the post-pandemic tenant-favorable market, with well-located and newly renovated buildings reporting stronger occupancy and higher asking rents. For tenants, competition for updated, transit-accessible units has increased, contributing to higher costs in those segments. Brokers and analysts say the coming year will test whether elevated rents and limited availability persist as additional construction and redevelopment projects deliver new supply to the market.
