By Nicholas Hein – Director, Nomad Group

If one theme defined NYC commercial leasing in Q2 2025, it was “Flight to Quality.” Once a buzzword, it’s now the baseline. Landlords, tenants, and brokers are aligned: quality space is no longer a differentiator, it’s the cost of entry.

We define this shift not just as a preference for high-end finishes, but a wholesale reevaluation of what office space needs to offer: amenitized buildings, modernized infrastructure, flexible layouts, and a hospitality-driven experience from lobby to desk. For the first time since early 2020, companies in Q2 found themselves in competition, not for space, but for the right space.

Market Performance: Leasing is Up, But Not Everywhere

Manhattan leasing volume reached 8.5 million square feet in Q2, a notable 21% increase over Q1 (7 million SF) and up more than 9% year-over-year from 2023. But that topline stat masks a deeper bifurcation: over 70% of all leasing activity took place in Class A or trophy buildings. While many Class B and C assets face rising vacancies and continued tenant attrition, Midtown South landlords who have invested in thoughtful capital improvements are beginning to see performance more in line with Class A standards. It’s a clear sign that continued investment still wins in this market, and tenants are taking notice.

According to CBRE, direct vacancy in Midtown Class B buildings hit a new high of 23.4% in Q2, while Class A stabilized at 13.1%. And landlords who haven’t invested in meaningful capital upgrades since 2020 are facing double-digit availability and softening rents. The winners? Owners who reinvested early and often.

Owners That Invested Are Winning

At Nomad, we’ve seen this market divide firsthand. Representing groups like Justin Management, Davis Realty, and Skyway Property Group, we’re working with landlords who made meaningful investments post-COVID—and are now seeing those bets pay off.

At Justin Management, 12 buildings underwent full lobby renovations, with new finishes, glass-fronted offices, and furnished prebuilds. Their portfolio, totaling 1.5 million SF—is now 97% leased, with average absorption within 90 days of listing.

Davis Realty’s 104 West 27th Street is now fully leased. The 7,000 SF floorplates were designed with high-growth tech in mind, flexible layouts, dense configurations, and short-term optionality. Their most recent tenants, Numeric and Nimbleway, both signed within 60 days of initial tour.

At Skyway Property Group’s 30 West 21st Street, our team achieved 100% occupancy in Q2. The key was optionality: short-term lease structures, high-end FF&E packages, and a willingness to modify layouts. It’s now one of the few boutique buildings in Flatiron offering a Class A experience without institutional rigidity.

What Tenants Want, and What They’re Willing to Pay

Across dozens of searches, tenant demand has crystalized around five core requirements:

• Top-tier finishes (polished concrete or wide-plank flooring)
• Abundant natural light (preferably penthouse or high-floor)
• Furnished spaces (brand-name, not fast furniture)
• Central location (within a 5-minute walk of major transit)
• Landlord flexibility (short-term options, plug-and-play setups)

And they’re willing to pay for it. Net effective rents for prime boutique space are averaging $70–$80 PSF, with trophy buildings exceeding $100 PSF. In some cases, like at 900 Broadway, we’re seeing second-generation space break portfolio records.

Take CollegeVine: they beat two competitors to secure a turnkey space at $100 PSF, a new high for the asset and for Justin Management’s entire portfolio. Or Flora AI, which doubled its footprint at Domino Sugar Factory within a week of move-in. In both cases, the alternative wasn’t a better deal—it was missing out entirely.

Pre-builds Are Setting the Pace at the Top

Institutional owners are adapting, and fast. Vornado, Durst, and Soloviev Group are releasing newly constructed prebuilt suites across their portfolios, targeting early-stage and venture-backed firms with elevated expectations. These suites aren’t just shell spaces with desks, they’re fully branded environments asking premium rents:

• Penn 2 Prebuilds: $139 PSF
• 9 West 57th Street (Soloviev): $210 PSF

And tenants are taking them. These landlords understand the urgency of today’s market: the best space never hits CoStar. It leases off-market, quietly, and quickly.

What Happens to the Rest?

The rest of the market, the unrenovated, unamenitized, uncompetitive stock, is in real trouble. Sublet inventory has ticked up slightly to 15.3 million SF across Manhattan, and older buildings are seeing prolonged downtimes. Without capital investment or a dramatic price correction, many Class B and C landlords will continue losing share.

In 2025, tenants are not compromising on quality. Those who move quickly, show strong credit, and commit to longer terms are winning. Those who hesitate are circling back to space they previously passed on, at higher rents, with fewer concessions.

Speed, Quality, and Confidence Win the Market

The message of Q2 is clear: flight to quality is no longer a trend, it’s the new market logic.

Whether you’re a landlord or a tenant, the winners are those who move with purpose, back their conviction with capital, and refuse to settle. In a market defined by selectivity, speed and quality are the currency of choice.

If you wait too long, the opportunity isn’t just gone, it’s someone else’s lease.