According to the firm's report, "robust job growth is stimulating demand, as five of the borough's seven submarkets have recorded year-over-year vacancy declines greater than 100 basis points." The 36,000 new jobs expected this year represents a 1.5% gain, the firm adds, with office-using employment in Manhattan expected to grow by 17,300.

And of the seven submarkets, Von Der Ahe tells GlobeSt.com the Midtown and Grand Central submarkets are the two tightest right now, with the space crunch pushing tenants into Downtown.

In a push to meet the rising demand, developers are slated to deliver 1.8 million sf of office space this year, with some building owners putting aside plans for residential conversion to keep properties office, the report adds. "The strength of the office market is causing some investors who recently purchased class B and class C office buildings for conversion to residential use to abandon those plans in favor of office use," explains Edward Jordan, regional manager at Marcus & Millichap. "Some of these owners are finding that reselling to an office investor is a profitable exit strategy, as evidenced by the recent sale of the International Toy Center on Madison Square Park for $500 million."

L&L Holding Co. purchased the center at 200 Fifth Ave. in April. L&L's plans for the building include a $75-million renovation to convert the 800,000-sf building into class A office space, as GlobeSt.com previously reported.

And as with any space crunch comes rent increases. According to Marcus & Millichap's second quarter report, both asking and effective rents in Manhattan will increase 15.2% to $59.27 per sf and $50.42 per sf, respectively.