Fierce competition for space is letting New York City's office landlords pull back from flexibility they offered to tenants in the years that followed the pandemic.

That is a concern for large businesses that are negotiating deals for years in the future amid rising talk of artificial intelligence’s potential to disrupt large swaths of the labor market and the economy.

“Trying to understand what our headcount projections and office attendance patterns will look like in the future are really driving us towards digging our heels in on flexibility going forward,” KPMG Head of Real Estate Transactions and Portfolio Strategy Michael Plavin said at Bisnow’s 2026 New York Commercial Leasing and Asset Management Conference on Thursday. 

But executives from some of Manhattan's biggest office owners said onstage at 3 Columbus Circle that they are drawing a harder line with tenants that want the ability to take more or less space in the future without fully committing.

“We're expecting tenants to build in some of that growth in their initial footprint, versus landlords having to warehouse space,” Tishman Speyer Managing Director Samantha Augarten said. “We're really able to pull back on some of the termination options and contraction options that we had to give them.”

During the earlier post-pandemic years, landlords often gave tenants lease options that would allow them to grow, shrink or terminate agreements with greater ease than in prior years.

But Manhattan’s office market is on track to have its best leasing year since 2000, finishing August with its lowest availability rate since 2020, at 12.5%, according to Colliers.

“Right now, I think tenants are more focused on how they can secure the space” than flexibility, Silverstein Properties Senior Vice President and Director of Leasing Keith Cody said at Bisnow's event.

“They know there's typically multiple offers on every large-block availability,” he said.

In the highest-quality space, vacancy is just 3.5%, SL Green Director of Leasing Steven Durels said this week at the BofA Securities 2026 Global Real Estate Conference. Towers under construction are locking in deals with tenants for $300 per SF or higher.

Where SL Green had been offering up to 18 months’ free rent, that is now down to somewhere between 14 and 16 months, Durels said. And while it was offering tenant improvement allowances of $150 to $165 per SF a couple of years ago, that is down to $145 to $150 per SF today.

Silverstein and Tishman Speyer have also pulled back on the freebies they offer tenants.

“We're seeing free rent come down,” Augarten said. “TIs have plateaued.”

Landlords are also using their leverage to do more due diligence on the tenants they are considering leasing space to. That is fairly straightforward for legal and financial tenants, which are two of the industries that have been driving Manhattan leasing skyward this year.

But it is harder for tech firms, which are only second to financial services in terms of leasing velocity, Cody said. Part of the reason for that is that 41% of tech leasing is driven by AI firms, most of which are startups, he said.

“With some of these newer entities, you're doing more homework on the individuals behind it, the backing, etc.,” he said. “There's not going to be, necessarily, the 10-, 20-, 30-year-plus track record like you have with KPMG.”

AI’s leasing frenzy echoes the dot-com boom of the early 2000s, Meister Seelig & Schuster partner Howard Koh said. Consequently, landlords seeking to avoid unexpectedly winding up with empty space and no rent coming in are being careful about the offers they make, Cody said.

“There might be certain ones where we just decide to part ways friends. We just don't feel comfortable,” he said. "It's really case by case.”

Landlords might be willing to give more flexibility to more traditional creditworthy tenants, Augarten said, especially for larger transactions and in certain buildings in Tishman Speyer’s portfolio. But even in those cases, the landlord would likely include caveats like “making sure that we have some firm commitment for maybe longer than the other riders would have.”

And AI’s future impacts mean that even traditional tenant groups don’t have as much predictability as they or their landlords would like when it comes to making concrete projections around future space needs, Plavin said. 

“Coming out of Covid, we were not entirely sure about what return to work would look like. That is crystallized a bit more now,” he said. “But just as we get over that hump, now we're looking forward to what does occupancy look like in the future, in the age of AI.”

Landlords’ insistence on fixed square footage, combined with ever-shrinking office availability and that uncertainty around occupancy, is creating significant pressure for tenants. KPMG has a long-term lease in Manhattan but faces decisions for offices in other cities coming up within the next five years, Plavin said.

“I don't know what I need in 2031. I don't know what I need three years from now sometimes,” he said. “It's creating a lot of pressure on tenants, I think, to make forward commitments again. That's where that flexibility comes into the equation and becomes so much more important.”