Manhattan Office Incentives At All-Time High

Manhattan’s red-hot office leasing is giving landlords reason to smile, though they may still grimace at the expense it takes to lure new tenants.

Tenant incentive packages — the payouts building owners offer companies as deal-sweeteners to build out their office spaces — are at an all-time high, despite landlords gaining more leverage in a tightening market.

The average Manhattan work-value package crested above $90 per square foot in the first half of the year, according to CompStak. That’s the highest it’s ever been, and the growth is accelerating.

Work allowances jumped nearly 30 percent to about $86 per square foot between 2019 and 2022, and then held pretty much steady until last year. But they’ve been climbing rapidly through the first half of 2026, and a jump in construction costs tracked by the Bureau of Labor Statistics in September may push that number even higher.

Though the office leasing boom is mostly concentrated on the higher end of the market, lower-rent deals are primarily driving incentives.

“The big picture: TI allowances in Manhattan are at a record in nominal terms, and leasing has shifted sharply toward higher-rent space,” said CompStak spokesperson Alie Baumann. “But in 2026 the TI gains are coming from smaller, lower-rent and non-prime deals, packages at the top of the market have eased from their 2024 peaks, and rising construction costs mean today’s allowances buy less build-out than they did in 2017.”

Tenant incentive costs have long been a thorn in the side of office investors. In an ideal world, landlords would gain more leverage in tighter markets and have to pay less to get tenants to sign deals. But these costs have proven sticky over the years, through both up and down cycles.

Manhattan office leasing is on track to record just shy of 44 million square feet of leasing this year, according to Colliers, which would make it the most active year since 2000.

But the overall availability rate is 12.4 percent — still considered a tenants’ market — and much of the recovery has been driven by demand for top-tier space.

In fact, incentive packages for the most expensive office space peaked in 2024 at $115.50 per foot, and have come down since to about $109.

Office leases under $100 per foot starting rent made up about half of the leased space in the first half of the year, according to CompStak, and average incentives were more than $77.50 per square foot, an all-time high.

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