New York’s office market may still be trudging along in its recovery from COVID-19 pandemic woes, but it’s a different story when it comes to tenants willing to shell out top dollar for desirable space.

The number of office tenants in Manhattan signing $100-plus per-square-foot starting rent leases hit a record high level of 192 last year, representing 5.6 million square feet of space in Manhattan, brokerage firm JLL said Monday in a statement. The top-dollar leasing activity accounted for 26% of the 21.7 million square feet in total 2023 leasing.

Private equity firms, hedge funds and other financial services providers, which have led the city’s office leasing activity, accounted for 80% of all $100-plus leasing, followed by 8% from legal services, JLL said. The two sectors have led the city’s overall leasing activity, according to real estate executives.

The trend has created a bifurcation in New York and other major U.S. markets as workers’ return-to-office rate hasn’t recorded any sizable jump, and economic uncertainty has spurred tech firms to pause or pull back office expansions.

The Federal Reserve’s string of rate hikes also has led to loan defaults and tightened financing for the troubled property type. The office vacancy rate in both New York and the United States has each surged to record high levels of more than 14%.

“Despite fragility in the broader market, top-tier leasing was extremely strong,” JLL said. “Tenants continued to gravitate to new construction and heavily renovated assets.”

Manhattan isn’t the only market seeing the so-called flight-to-quality trend. In Miami, for instance, 830 Brickell in 2022 inked a number of $100-plus deals with major tenants including hedge fund Citadel and law firm Kirkland & Ellis, in a market where market asking rent averages just under $50 per square foot, according to CoStar data.

“Only a handful of markets” in the United States have ever recorded significant leases above $100 per square foot in full service gross rent, JLL’s national office research director Jacob Rowden told CoStar News in an email. Besides New York, Boston, the San Francisco Bay Area, Miami, and Washington, D.C., are the only other markets that reach deals at that price level with “some degree of regularity,” he said, adding some of the leasing in new developments in Century City in Los Angeles come very close to $100.

The JLL study also showed traditional Manhattan office strongholds can still hold their ground. For example, the historic Seagram Building, owned by RFR, at 375 Park Ave. secured 12 triple-digit dollar lease deals, the most of any Manhattan building last year with two-thirds of them renewals. Market watchers have expressed concerns that the corporate office corridor of Park Avenue in the Plaza District may lose cachet to such neighborhoods as Hudson Yards that are billed as live-work-play domains.

Meanwhile, One Vanderbilt, also near Park Avenue and owned by Manhattan’s largest office landlord, SL Green Realty, scored the highest rent of last year with its $247 per-square-foot lease to real estate investment firm Aimco signed in June, JLL said.

“Property owners have recognized the trend toward higher-quality product, and are positioning their buildings to appeal to more discerning occupiers,” JLL Vice Chairman Cynthia Wasserberger said in the statement, adding the record number of top-dollar leases last year also were spread across a greater group of buildings than ever before. "While many tenants focused on right-sizing operations over the past few years, 2023 was all about growth and expansion among larger occupants, tenants in the 10 largest top-tier transactions of the year all expanded and grew appreciably in their new commitments.”

The largest top-dollar transaction of 2023 in Manhattan was from Vornado Realty Trust with a 585,000-square-foot lease at 350 Park Ave., JLL said. Citadel and an affiliate of billionaire CEO Ken Griffin have reached agreements with Vornado to master lease the space.

“The high end of the market seemed impervious to the woes that beset the rest of Manhattan,” CBRE said in a report last week. The largest U.S. brokerage firm tracked 128 transactions at $100 per square foot that closed in 2023 that it said marked the second-highest annual total ever. CBRE said last year’s total count it tracked was 35% above the 10-year average and only 10% below 2022’s record number of 142 deals. It said transactions over $200 per square foot also had their second-best all-time total with 10 deals, showing “the highest reaches of Manhattan’s office market remain on the rise.”

CBRE data also showed financial services dominated 2023 top-dollar leasing with 73% share of the $100-plus per-square-foot transactions. The tech sector’s “retreat in the face of industry headwinds” hurt its top-dollar leasing share with the industry accounting for just 5% of the top-dollar deal count and 6% of the square footage, down from the tech industry’s 2019 peak of 50% share by square footage and 13% by deal count, CBRE said.

When factoring in tenant concessions and improvement allowances, high-end properties’ net-effective rents stood at $87 per square foot on average last year, above $80 per square foot last year and just shy of the record level of $91 in Manhattan in 2019, according to the CBRE report.

"The primary driver was the surge in starting rent," which rose 6%, CBRE said. "Combined with shrinking availability rates among high-quality buildings, the top end of the market is nearly back to normal, while the rest of the market lags significantly."