A new report from Cushman & Wakefield shows that almost a quarter of Manhattan office relocations in 2023, 2024 and 2025 ended up in the Pennsylvania Station submarket, and that most tenants relocated while expanding their space.
The report indicates that “between 2023 and 2025, more than 3.5 million square feet of relocations flowed into Penn Station, with the majority (83.2 percent) originating from neighboring Midtown submarkets.”
Financial services firms took 24 percent of this space, with professional services firms just behind at 23.7 percent, technology taking 18.8 percent, and media and information taking 10.7 percent. The remaining space was divided along categories including media, legal, real estate, entertainment and more.
The report notes that 14 office buildings have been developed or renovated in the Penn Station submarket over the past decade, adding or augmenting around 23 million square feet of highly desirable office space, and expanding submarket inventory by 124.2 percent. These buildings have a current total vacancy rate of just 6.5 percent. For comparison, a separate C&W report pegged Manhattan’s overall vacancy rate at 19.9 percent by the end of March.
Lori Albert, director of tri-state research at C&W, said that this development has transformed the Penn District submarket from an area littered with Class B and C office product to a submarket dominated by Class A space.
“Prior to this modernization of the area, there were only six Class A buildings in the Penn Station area. Now there are 20, and there’s less B and C,” said Albert. “Since Hudson Yards began in 2016, the whole area has been transformed, and then, in 2023, the renovations of Penn 1 and Penn 2 really modernized the area. It helped to alleviate a lot of overcrowdedness and just became very attractive to a lot of tenants.”
Looking ahead, six additional conversions or new developments are currently in the works that will expand Class A inventory in the submarket by another 30.1 percent over the next seven years.
Some of the companies that have relocated in the past few years, all to Penn 2, include Universal Music Group, which took 336,000 square feet for 22 years in a move from almost 100,000 fewer square feet at 1755 Broadway in March 2025; Verizon, which took 203,000 square feet for 10 years in July 2025 in a move from 140 West Street after abandoning plans to move to the Lower East Side’s Essex Crossing; and FSG Global, which took 80,000 square feet for 15 years in October 2025 in a move from 909 Third Avenue, as Commercial Observer reported.
All of these and more are indicative of just how dominant the Penn Station submarket has become.
“Penn Station has firmly established itself as one of the most competitive and compelling office submarkets in New York City, thanks to a decadelong transformation,” Bruce Mosler, chairman of global brokerage for C&W, said in a statement. “Projects like Vornado’s Penn District, including the Penn 1 and Penn 2 office towers, are the new gateway to the West Side, offering connectivity to Hudson Yards and Manhattan West. These projects underscore how thoughtful redevelopment and transit-oriented planning can fundamentally reposition an entire neighborhood and attract sustained tenant demand.”
In the February 2026 earnings call for Vornado Realty Trust, the area’s main office developer, company chairman and CEO Steven Roth extolled the virtues of the company’s office properties in the area.
“2025 results reflected the market’s growing appreciation for our transformation of the Penn District,” Roth said on the call. “Tenants and brokers get it: high-quality office space, the best transportation, literally on top of Penn Station, the region’s transportation hub, and the plethora of amenities and hangout spaces are unmatched. In 2025 at Penn 2, we leased 908,000 square feet at average starting rents of $109 per square foot with an average term of over 17 years. … We have now leased over 1.4 million square feet of Penn 2 since project inception, putting us at 80 percent occupancy, [getting to] the target which we guided to. We expect to finish the lease-up this year.”
Looking across Manhattan, the report notes that C&W identified 612 relocations across the three years it covers, with 420 of those, representing 14.5 million square feet of space, involving a move to another Manhattan submarket. Of these, 67.7 percent landed in just five submarkets: Penn Station, Sixth Avenue/Rockefeller Center, Madison Avenue/Fifth Avenue, Madison Avenue/Union Square and Grand Central.
After Penn Station, the next most popular submarket for relocations has been Sixth Avenue/Rock Center, with just under 2 million square feet over the report’s time period. Of the top five submarkets, only these two saw increasing relocation square footage over each of the three years.
C&W also noted that companies relocating to the Penn Station submarket are paying prime rates. Average asking rents there were 37.8 percent higher than the Midtown average, and overall vacancy was 3.1 percent lower.
The report also cited how companies relocating to the Penn District are “significantly more likely to expand their footprint rather than consolidate,” bucking current trends toward smaller leases.
Albert credited the larger footprints to the availability of larger blocks of space in the Penn submarket.
“Penn Station offers some of the larger blocks available, especially since Penn 2 was completed,” said Albert, noting that much of this space has been “gobbled up.”
According to Roth, the overall reason for the area’s newfound success is that when all of this change is taken together, it has transformed the area into a cohesive business district.
“The Penn District is a district,” said Roth on the company’s earnings call. “It’s office buildings, it’s retail, it’s events, it’s a gathering place, it’s the perch, it’s the town halls. It’s a system of interaction and hospitality and workplaces, which is important. Each plays off the other and complements the other and helps the other.”
Larry Getlen can be reached at lgetlen@commercialobserver.com.
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