Migration patterns have made the Sunbelt and West prime CRE markets. No surprise at this point. But it’s becoming too easy for developers, investors, owners, and operators to keep looking where everyone else is, and that’s often a recipe for missing big market opportunities.

According to data pulled together by Cushman & Wakefield, one of those opportunities could be office space in New York City. Even if some companies have relocated headquarters and others have added new regional offices, New York is a massive and well-regarded commercial real estate market that isn’t about to close shop in the near future.

Starting at the top, for those worried about whether companies would keep offices after the pandemic. Through May, companies have signed more than 6.5 million square feet of new leases. According to Cushman & Wakefield’s count, that’s 5.9% higher than the 2015 through 2019 five-year average of 6.1 million square feet.

Next, financial services have been heavily in the new leasing. Out of 17 new or expansion leases that were larger than 100,000 square feet, 11 were by financial companies.

Third, the firm wrote, “Pre-leasing through May in properties scheduled for delivery over the next two years has totaled 1.3 msf, accounting for 16.0% of leasing activity in Class A space.”

The most expensive starting rents hit all-time highs of $210.18 per square foot, higher than the previous $197.88 in 2021. That’s a year-over-year jump of 6.2%.

And fifth, Hudson Yards will see another 15.9 million square feet open with two new buildings, meaning a 56% expansion this year.

Of course, all data has caveats. Starting, again, at the top, the five-year figure over a relatively short range. What would it be if it were extended to ten years? And, given the pandemic, how much of this had been plans put on hold because of uncertainty over 2020 and 2021? The latter, especially, could distort the picture and effectively pump up results so far in 2022 beyond what the pace of growth might have been. 

Second, that financial services would be heavily represented in large space acquisitions might be expected. Also, there’s no differentiation between expansion and new leases. While the end effect is still more leased space, it could be for vastly different reasons, whether new business causing corporate expansions or a realization that some spaces had become too crowded, which wouldn’t necessarily indicate better economic times coming.

In terms of pre-leasing, if contracts were signed, would they have been counted in the total 6.5 million square feet? If so, that could overstate how quickly companies are moving if space was scheduled for delivery over the next two years. Not bad, but perhaps somewhat overselling marketing conditions.

On top rental rates, they’ve been going up in virtually every sector of CRE. Now, office space hasn’t seen the same degree of cap compression than, say, industrial and multifamily, but there’s still been money flooding in from investors looking for inflation hedges and greater returns than some other types of investments. Also, top rents aren’t median rents, so there’s the open question of how office space in general is moving. 

As far as Hudson Yards, more space is good news if it all gets snapped up. The balance of supply and demand over the next few years is still cloudy.

But even with some salt at the data table, this still is good market news when less than two years ago some large companies, including financial giants, were planning to reduce their office footprints. Even in February, according to one survey, 85% of respondents said their companies were using at most the same amount of space they previously had and upwards of 30% less. But samples aren’t necessarily representative and even some news from big companies doesn’t mean all big companies.