Office Tenants Skim the Cream

NEW YORK CITY-To get a clear indication of the “flight to quality” principle in action when it comes to Manhattan office leasing, consider the Plaza District, where total available class A space has declined 18.6% since the start of the year. “The market is separating into two tiers as tenants winnow out the gems and the big blocks of space, leaving behind a hodgepodge of spaces of varying quality,” according to tenant-rep firm Studley in its second-quarter report on the market.

Meanwhile, Q2 and monthly reports all point to the same thing: leasing velocity has maintained the high velocity it began to establish last summer. CB Richard Ellis notes that leasing volume for July exceeded the five-year average in all three submarkets—63% above average in the case of Downtown—while Studley observes that the island’s Q2 volume of 9.6 million square feet was the highest quarterly volume since 2000.