The much-ballyhooed “flight to quality” was supposed to mean one thing: frill-less Class B office buildings are left in the lurch.
But that’s not exactly true. While the biggest property owners are indeed spending fortunes to kit out their glittering glass office towers like five-star hotels, half of the city’s nearly 400 million square feet of offices are occupied by tenants that worry more about price than gym equipment.
After all, Class B rents are down 25% from their peak; some below a third.
Tenants that require between 5,000 square feet and 25,000 square feet signed nearly 90 leases in Manhattan in Q3 alone, totaling almost 900,000 square feet, researchers at Williams Equities found. In 2023, 1.1 million square feet was leased in B buildings in Manhattan — the most since the end of 2019.
“To say that B buildings are dead and obsolete is nonsense,” said Michael Cohen of Williams Equities. “It’s fake news.”
Steve Whittaker
Williams recently signed a lease with Lacoste for 18,364 square feet on the 17th floor of 136 Madison Ave. In another large B building deal, Ramp leased 66,000 square feet at 28 and 40 W. 23rd St.
In the third quarter, Two Sigma renewed 265,000 square feet at 100 Sixth Ave. At the same time, Ralph Lauren renewed 256,000 square feet at 601 W. 26th St., aka the Starrett-Lehigh Building. So did Zocdoc, which renewed a 46,000-square-foot lease at 568 Broadway.
Unless blocked by their lenders because of high loan-to-value ratios, most building owners are also willing to make concessions on rental pricing, tenant improvement allowances and free-rent periods.
“In the West 30s we have done leases under $30 a foot and the market was $40 to $48 pre-pandemic,” said Christopher…