The Flight Is Justified: The Priciest Offices Have Higher Foot Traffic

If a company takes space in one of the priciest office buildings on the market, will it actually make their employees come to work more often? The simple answer is yes.

In 25 Manhattan buildings that signed at least three leases for $100 per SF or more last year, foot traffic is approximately 10% higher than the rest of Manhattan’s office stock, according to an analysis by Placer.ai provided to Bisnow. 

The desire to find an office space that employees will want to use has drawn more companies to the most expensive buildings, with 196 Manhattan office leases signed last year at $100 per SF or more, an all-time high, according to JLL. 

The new foot traffic data validates the flight-to-quality narrative that brokers have repeated since the onset of the pandemic.

“It certainly comes as no surprise to us,” Savills Tri-State President David Goldstein said. “The office is becoming more of a destination.”

As companies rightsize their space and adjust to the prevalence of remote work, some have upgraded to new, amenity-rich buildings, many of which have come to the market in recent years. 

Among the offices on the list are The Spiral, which offers terraces and a 66th-floor clubhouse; 550 Madison Ave., which recently attracted three exclusive restaurants to its base; and 55 Hudson Yards, which was delivered in 2019 and was 96% leased as of last June. 

At 711 Fifth Ave., next to flagship stores from Armani and Dolce & Gabbana, developer Shvo upgraded the former Coca-Cola Building into a luxury destination with a hotel-style lobby, members-only club and curated art collection.

Michael Shvo said his firm has signed multiple leases for more than $250 per SF, more than doubling rents since the developer acquired the property in 2020. He said the same teams that manage his firm's office properties manage their luxury residential developments, such as Aman New York or The Raleigh in Miami Beach. 

“We consider the two to be deserving of the same thoughtfulness and believe there is no reason one’s experience in the office should be any different to the experience where they live,” Shvo said in a statement. 

The finance industry, in which companies are also aggressively calling workers back to the office, has dominated leasing in the last year, and hedge funds and private equity firms were the types of companies that dominated the list of triple-digit leases signed.

For the index of buildings with triple-digit leases, foot traffic was 10% below pre-pandemic levels in August, 13% below in September and 8% off in October. In November, foot traffic was nearly 5% above pre-pandemic levels.

For the office market as a whole, foot traffic was 18% below 2019 levels in August, 21% off in September, 20% down in October and 12% less in November.

In all, 2.5 million employees across the country faced office mandates last year, with 1 million being called back to their desks following Labor Day, according to a report by JLL. 

But mandates don't guarantee a return. 

Nationally, 45% of employees with a mandate are expected to be in the office at least four days a week, but only 24% report abiding by those rules, according to a survey by workplace management company Robin.

Robin CEO Micah Remley said that even with Class-A amenities, it can be difficult to convince employees to adjust their routines.

“Amenities are really good during the leasing process. When you're out touring space, you're like, ‘Oh, my God, this looks amazing. I'd love to see my employees use it,’” Remley said. “But the fact of the matter is that once people build the inertia of working from home — they've got a gym membership close to home, they're working from home two, three days a week — they're not going to go to the office for that.”

Foot traffic in pricey buildings is also helped by the fact that many of the leases are for small spaces. Only seven of the last year’s most expensive leases were for more than 100K SF, and roughly 75% of the top-tier leases were for 30K SF or less, according to the JLL report. 

As a result, fewer desks sit empty and employees don’t feel like they’re sitting in a cold, empty office. Experiencing that social interaction may make employees more likely to return — and their bosses feel a sense of relief that they aren't burning cash on that pricey lease, Remley said. 

The survey by Robin found that while 64% of respondents feel indifferent when their teams are in the office without them, 73% feel more connected to their company after being in the office with colleagues.

Goldstein, who lists Tiffany and Ralph Lauren among his clients, said workers who have a “very elegant, comfortable and meaningful experience” in the office are the ones who show up most often.

“They're there,” he said. “It's physical and emotional.”