A Shift in Rent Prices Post-Pandemic Sparks a New Attraction for Manhattan’s Class B Buildings

While the phrase ‘flight to quality’ frequently surfaces when describing office market trends, others within the real estate industry point out that all Class B buildings shouldn’t be painted with the same brush; and that the “zeal for redevelopment of these unfussy structures may be misplaced.” Recently, a “small but steady stream of midsize firms” that have been based in the outer boroughs for years are taking a closer look at Manhattan’s Class B buildings since rent prices are still below pre-COVID levels at many addresses. Although these buildings are not as new or offer the variety of amenities that Class A buildings do, the price point is a major factor in decisions to relocate to Manhattan. This new interest has presented a “bit of a silver linings for a subsector often written off as obsolete,” since the rent reductions are allowing deals that would not have been possible five years ago. Furthermore, the “cost savings are only a part of the equation,” companies finding that “even more than in past years, a Manhattan address is a tool for recruiting employees” who may have relocated to the suburbs during the pandemic and now need to commute;” and others point out that as startup businesses scale up, they “want the more formal corporate presence that Manhattan exudes.” Regardless of the current connotation of the phrase ‘flight to quality’, Class B buildings continue to be an important and competitive asset within Manhattan’s office market. For some companies, the ‘flight’ does not have to be about a switch in asset classes, it can simply represent a move to an improved situation from where they have relocated from.

Source:    https://www.crainsnewyork.com/real-estate/class-b-buildings-lure-firms-cheaper-rent-transit-access