The Data Behind the Office Sector’s Flight-To-Quality

The rebound of the United States office sector appears nowhere in sight. Overall vacancy rates are far from pre-pandemic levels and leasing activity remains weak. But, that’s just the big picture. There’s a segment of the office sector that is faring quite well and that’s the high-end property segment. Specifically, trophy and Class A properties are in high demand. As tenants hammer out their space utilization strategies in the hybrid work environment, many are capitalizing on the opportunity to secure premier office accommodations, but it’s costing them a pretty penny.

In order to better understand just how the market for trophy class office space differs from its Class A counterparts we took a look at how asking rents differ between the two as well as the overall vacancy rate for the country’s top 5 metros. Here is what we found:

Office MarketTrophy Asking RentClass A Asking RentVacancy RateManhattan$127.87$80.4319.7%San Francisco$122.16$75.8629.4%Washington, D.C.$95.14$71.5818.2%Los Angeles$45.51$42.7828.2%Data via Avison Young

Manhattan

Manhattan has long been the most expensive office market in the United States, that hasn’t changed. Average asking rents for trophy properties in the first quarter of 2023 totaled a whopping $127.87 per square foot, and Class A asking rents averaged $80.43 per square foot. The amount that tenants are willing to pay for high-end accommodations has been on the rise, despite the climate of economic uncertainty. While landlords may not be getting asking rates, they’re still getting tenants to pay a notably higher amount than they did in 2022. Net effective rent for trophy space in Manhattan averaged

Read more at Propmodo.

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