Continued “Flight to Quality” prompts leasing rebound as second quarter activity finishes strong

An improving local economy coupled with increased office occupancy translated into a rebound in office leasing activity for the second quarter (second strongest quarter since 4Q 2019). Manhattan office leasing totaled 8.2 million square feet (msf) for Q2 2022, up 66.5% from a year ago and up 6.6% from its five-year Q2 average. The uptick in leasing was largely fueled by deep-pocketed tenants, many who have been in the market for years, with a preference for newer top-quality product. Some tenants who relocated to new product were able to right-size their footprint in the process, a trend which may continue to emerge but will vary based on individual circumstances. Significant examples include HSBC’s relocation to 263,875 square feet (sf) at The Spiral, a 28.0% footprint reduction, and Macquarie’s relocation to 660 Fifth Avenue in which the firm shed 15.0% of its space. Other firms continue to add space, like Global Relay, who moved from less than 5,000 sf at 286 Madison Avenue to 76,984 sf at 1155 Avenue of the Americas. Only 23.0% of major Q2 leases (closed deals 50,000+ sf) resulted in a net occupancy reduction, but this trend has yet to fully take shape.

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