Flight-to-quality drives renewal rate to historical lows

  • Jacob Rowden
  • 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.