Flight-to-quality drives renewal rate to historical lows

Contributors:

Uncertainty at the outset of the pandemic drove a wave of short-term renewals, but activity over the past 12 months has favored relocation into higher quality space, driving the renewal rate to a multi-decade low.
Relocations have grown as a share of gross leasing activity as renewal probabilities for first-generation anchor tenants are declining.
Flight-to-quality is driving the increased preponderance for relocation vs. renewal, as more than 95% of relocation leases have been executed within an upgraded building class or at the same level.
The heightened rate of relocations is helping to propel rent growth at the top end of the market. Starting rents for relocation leases average 7.2% higher than renewals across all markets.

Public-private office pricing disconnect is intensifying