Vornado Realty Trust, one of Manhattan’s largest office landlords, used its year-end 2025 results to make a case that the office market’s recovery has reached its doorstep — and that its long, expensive bet on the Penn District is starting to pay off.

The company reported that 2025 was its most active year for Manhattan office leasing in more than a decade, signing roughly 3.7 million square feet across the borough, with office occupancy climbing toward the low 90% range. The clearest driver was the cluster of towers around Pennsylvania Station that Vornado has spent years and billions of dollars rebuilding.

Penn District does the heavy lifting

PENN 2, the renovated tower directly across from Madison Square Garden, alone accounted for roughly 908,000 square feet of 2025 leasing, at average starting rents of about $109 per square foot. Together with PENN 1, the redevelopment has become the centerpiece of Vornado’s strategy: take aging buildings beside the nation’s busiest transit hub and reposition them as premium, amenity-rich office space that can command top rents from tenants fleeing older stock.

That strategy fits the dominant pattern of the post-pandemic office market, in which demand has concentrated in the newest and most heavily renovated buildings while commodity space languishes. By pouring capital into the Penn towers, Vornado has positioned itself on the winning side of that divide — though at the cost of years of depressed earnings while the buildings were emptied, gut-renovated and re-leased.

A 2027 earnings story

For 2026, management struck a patient tone. The company guided to comparable funds from operations (FFO) roughly flat with 2025’s $2.32 per share, warning that the first quarter would be the most pressured by higher interest costs, a slower ramp of accounting-recognized rent and seasonal weakness in its Times Square signage business.

The bigger payoff, executives said, arrives in 2027. As newly signed leases at PENN 1 and PENN 2 begin generating recognized rent and free-rent periods roll off, Vornado expects meaningful earnings growth. The company pointed to roughly $200 million of “signed but not commenced” rent — committed lease payments not yet flowing through its income statement — as evidence that the growth is already contracted, not merely hoped for.

Why it matters

Vornado’s report, like rival SL Green’s, is a useful gauge of where the Manhattan office market is heading because of the company’s scale and its concentration in a single, closely watched submarket. A decade-best leasing year and rising occupancy reinforce the view that demand for top-tier space has firmly turned the corner, even as the broader office sector still carries enormous distress in older, less competitive buildings.

The Penn District also matters for the surrounding neighborhood. Vornado’s investment is tied to the long-running, often-delayed effort to overhaul Penn Station itself — a project involving the MTA, Amtrak and state and federal agencies — and the landlord’s leasing momentum strengthens the case that the area around the station can support the dense, transit-oriented office and retail district the company has long envisioned. The company has separately engaged Newmark to advance the next phase of Penn District retail leasing.

For now, Vornado is asking investors to look past a flat 2026 to a 2027 inflection — betting that the rents it has already signed in the shadow of Penn Station will convert a decade-best leasing year into the earnings growth it has promised.

Verification

Frequently Asked Questions

How did Vornado's leasing go in 2025?
Vornado said 2025 was its most active year for Manhattan office leasing in more than a decade, signing roughly 3.7 million square feet across the borough, with office occupancy approaching the low 90% range. Its Penn District redevelopment near Penn Station drove much of the demand.
What is the Penn District?
The Penn District is Vornado's multibillion-dollar effort to remake the office towers around Pennsylvania Station — chiefly PENN 1 and PENN 2 — into modernized, heavily amenitized buildings. PENN 2 alone accounted for roughly 908,000 square feet of 2025 leasing at average starting rents around $109 per square foot.
What is Vornado's 2026 outlook?
Management guided to comparable funds from operations (FFO) roughly flat with 2025's $2.32 per share, with the first quarter the most pressured by higher interest costs and slower GAAP rent ramp. The company expects more meaningful earnings growth in 2027 as signed rents flow through and free-rent periods burn off.
What is 'signed but not commenced' rent?
It refers to leases a landlord has signed but where the tenant has not yet started paying GAAP-recognized rent. Vornado highlighted roughly $200 million of such committed rent — future income already locked in that will be booked over coming years, supporting the company's growth case.