Marc Holliday, chairman and chief executive of SL Green Realty, Manhattan’s largest office landlord, recently returned from a business trip where he met with lenders and partners in Japan, Korea and Singapore with an observation he hadn't expected.

New York “is doing much better than the perception of how the city is doing,” Holliday said Tuesday at a lecture hosted by New York University’s Schack Institute of Real Estate, adding a lot of the trouble is being driven by debt and capital markets. “When there’s a lot of liquidity, everything feels great. When there’s a lack of liquidity, everything feels terrible, and nobody feels that more than the epicenter, which is New York City.”

Higher interest rates and fears about an economic downturn have seized up financing and other market activity, with the issues further exacerbated by the recent fallout of regional banks such as New York’s Signature Bank that have been among major lenders to real estate projects.

New quarterly market reports from brokerage firms show New York’s office vacancies last quarter reached new record highs.

But despite all those warning signs about the largest U.S. office market, SL Green showed a little positive momentum when it comes to leasing.

Holliday said SL Green leased 500,000 square feet in the first quarter, which he said “is usually a slow quarter for us.” That volume more than doubled from 196,421 square feet SL Green leased in the fourth quarter even though it was below what SL Green reported in the first quarter of 2022.

SL Green’s total leasing activity last quarter equaled more than 10% of New York’s total based on 4.6 million square feet signed, according to data tracked by the real estate firm JLL.

One of the deals SL Green signed last quarter included that with global cybersecurity firm Palo Alto Networks in a long-term, full-floor lease, which CoStar data shows spans 29,000 square feet, at its trophy One Madison Avenue development across from Madison Square Park.

The Summit observatory at SL Green’s One Vanderbilt tower by Grand Central Terminal is performing well, according to Holliday. The multilevel observation deck, opened just a year and a half ago, is expected to host close to 2 million visitors this year, he said.

“Almost every bit [of employment in New York] has been recovered in the private sector,” he said, adding the number of tourists, domestic and overseas, is expected to total 62 million this year. “There were 435,000 people that walked the streets of Times Square last week.”

On the residential front, SL Green’s 34-story, mixed-use residential building at 7 Dey St. in lower Manhattan that only began leasing in late 2021 has seen both its market rate and affordable units fully leased, he said.

Holliday, describing himself as “a great champion of the city through good times and bad,” acknowledged the pandemic-driven change in work patterns. Holliday said the balance of working from home and the office is not something he’s seen in his 32 years in the real estate business. It’s made developers such as SL Green rethink their plans, he said.

“For us, that’s been a reimagining of the entire workplace environment, literally from top to bottom,” Holliday said. “It’s a lot of money to execute these things. … But when you do it, and you do it right, the results are amazing. …. It’s incentive, where people wake up in the morning and say, ‘You know, I don’t want to miss my day' at so-and-so building. … That’s really become our entire focus.”

What Holliday referenced is the flight to quality trend of buildings that feature appealing amenities with easy transit and outdoor access that have been dominating office leasing trends in New York and other markets. Well-resourced employers seek desirable workspace to attract and keep talent. SL Green’s One Vanderbilt, for instance, not only features Summit but also Le Pavillon restaurant by chef Daniel Boulud. It’s one of the few towers in the city where some leases go above even more than $200 per square foot.

Deals over $100 per square foot made up 22% of Manhattan’s first-quarter leasing volume, JLL said.

As to offices that may no longer be as relevant, SL Green, like many other owners, are eyeing redeveloping some of them.

SL Green has partnered with Caesars Entertainment, the biggest U.S. casino-entertainment company, in seeking a gaming license in the tourist and entertainment mecca of Times Square to turn an office tower into a casino and hotel complex as New York attempts to recover from the fallout of the pandemic. Billionaire rapper Jay-Z’s entertainment company, Roc Nation, has joined their effort.

The bid is just one of many in a stiff field of competition, which also includes Soloviev Group’s plan to turn the largest undeveloped lot south of United Nations headquarters in Manhattan into a $3.5 billion mega mixed-use casino resort.

“There’s enormous desire and demand for great entertainment experiences,” Holliday said. “People want to get out. They want to experience. … A project like [the Times Square casino resort] has a halo effect to all the businesses around it. Everyone benefits.”