Leasing & tenant law · Owners & management · Deals & development · 10/20/2026
Manhattan office tenant incentives hit record despite leasing boom
Landlords are paying record build-out allowances to sign Manhattan office tenants, even as leasing picks up, according to CompStak. The 2026 gains come mostly from smaller, lower-rent and non-prime deals. Rising construction costs mean today's allowances buy less build-out than in 2017, and overall availability is still 12.4 percent.
Reported by The Real Deal · New YorkRead the original ↗
What happened
Landlords leasing Manhattan office space are paying more than ever to help tenants build out their offices, even as office leasing booms. The Real Deal reported on October 20, 2026, citing CompStak data, that the average Manhattan work-value package rose above $90 per square foot in the first half of 2026. CompStak said that is a record in nominal terms. These packages, called tenant improvement (TI) allowances, are money a building owner gives a company to fit out its space.
According to CompStak, allowances rose nearly 30 percent to about $86 per square foot between 2019 and 2022, then held about steady until last year. They have climbed quickly in 2026. CompStak said this year's gains come mostly from smaller, lower-rent and non-prime deals. Leases under $100 per square foot in starting rent made up about half of leased space in the first half of the year, with average incentives above $77.50 per square foot, an all-time high. Packages for the most expensive space peaked in 2024 at $115.50 per square foot and have since eased to about $109. CompStak also said rising construction costs mean today's allowances buy less build-out than in 2017. The Real Deal noted that a September jump in construction costs tracked by the Bureau of Labor Statistics may push allowances higher.
Commercial Observer, also on October 20, reported different data from Avison Young. Avison Young found Manhattan TI allowances up 7.9 percent year over year to $120.80 per square foot in September, and up 59.2 percent since 2019, based on 12-month moving averages. Unlike CompStak, Avison Young said the gains are concentrated in trophy and Class A space, with trophy allowances up 15.8 percent this year to $130.40 per square foot. Free rent fell 8.6 percent compared to 2025, to just over 10 months per lease on average as of October.
The Real Deal reported that Manhattan's overall office availability rate is 12.4 percent, which is still considered a tenants' market.
Key facts
- Market
- Manhattan office leasing
- Average TI package (CompStak)
- Above $90 per square foot, first half of 2026, a record
- Lower-rent deals (CompStak)
- Leases under $100/sq ft starting rent: about half of leased space; average incentives above $77.50/sq ft
- Top-tier packages (CompStak)
- Peaked at $115.50/sq ft in 2024, now about $109
- TI allowance (Avison Young)
- $120.80/sq ft in September, up 7.9% year over year and 59.2% since 2019
- Trophy TI (Avison Young)
- $130.40/sq ft, up 15.8% this year
- Free rent (Avison Young)
- Down 8.6% from 2025, just over 10 months per lease on average
- Availability rate
- 12.4 percent (The Real Deal)
What it means
Buyers and owners
Office owners and investors are still paying record build-out money to sign tenants, even in a strong leasing market. Rising construction costs mean each dollar of allowance buys less build-out.
Landlords
This story is about commercial office leases in Manhattan. The material does not describe any effect on residential buildings or small apartment landlords.
Tenants and voucher holders
The reported numbers cover office space, not apartments. Nothing in the material links these office concessions to residential rents or voucher programs.
The highlights
- Average Manhattan work-value package topped $90 per sq ft in the first half of 2026.
- Top-tier packages fell from a $115.50 per foot peak in 2024 to about $109.
- Leases under $100 per foot averaged over $77.50 per sq ft in incentives, a record.
Why it matters Landlords
Rising construction costs are pushing up build-out spending for NYC owners, even when demand improves.
Not known yet
- Why CompStak and Avison Young disagree on whether gains are at the top or bottom of the market
- How much of the record is due to construction cost inflation versus landlord competition
- Whether the trend extends beyond Manhattan to other boroughs
- How allowances compare once adjusted for inflation
Background
In commercial leasing, landlords often offer concessions to win tenants, mainly free rent months and tenant improvement allowances that pay for walls, wiring and finishes. These are negotiated deal by deal and differ from residential leasing in New York City, where many apartments fall under rent stabilization rules administered by HCR and annual increases set by the Rent Guidelines Board. Office market data firms each use their own methods and samples, so their figures can differ for the same period.
Also drawn from: New York Office Tenant Improvement Totals Rise in 2026 Amid Market Shifts (Commercial Observer)
Summary written by Bulwark from The Real Deal · New York’s reporting. The original story is at therealdeal.com. This is general information, not legal advice.
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Photo: Andre Carrotflower, CC BY-SA 4.0