Brookfield Leads The Charge On Flight To Quality

At a time when flight-to-quality has come to define the fate of the office sector, Brookfield Properties has found itself optimally positioned, with an office portfolio filled with Class A properties prospering in a way that defies overall market conditions.

Callie Haines, Brookfield’s executive vice president and head of the Northeast Region, discussed some of Brookfield’s current successes in this area on the latest installment of “Coffee with Citrin Cooperman,” a video series presented by Citrin Cooperman Advisors LLC and produced with Commercial Observer, and hosted by Citrin Cooperman partner Nicole Barthelemy.

“Flight-to-quality has really accelerated over the past few years, largely due to the impact of Covid. It has impacted Brookfield in a very positive way,” said Haines. “The majority of our portfolio is trophy, or Class A. So we’ve been a big beneficiary of this.”

Haines, who will celebrate her 20th anniversary with Brookfield in 2025, noted several examples of how the firm’s properties have met the corporate world’s current demand.

“Manhattan West is six million square feet, and 95 percent leased,” said Haines. “At 660 5th Avenue, we completed the redevelopment during COVID, turning a Class B asset at a fantastic location into a trophy building. So our timing was pretty fortuitous on that.”

Haines pointed out just how essential it is for developers to deliver only the highest-quality product in today’s market.    

“Ninety percent of the vacancies in the market are in 30 percent of the assets,” said Haines. “That’s a really telling statistic about how flight-to-quality 

has pushed occupancy in the high-end market.”

While the demand side of the office equation has found companies seeking only the best and nothing less, supply of such properties has hit its limits in New York, leading to low vacancies at the best properties and efforts to upgrade from those whose properties miss the mark. 

“There is a lack of trophy office space right now, and there is no new supply coming online,” said Haines. “What that is going to do is push owners of lesser-quality assets with capital to invest in creating a redeveloped class of office building. We’ll see a great rejuvenation of some assets that have just sort of chugged along throughout the years. It’s a marked shift.”

Haines also discussed how this shift will not only lead to more ground-up and redeveloped top-of-the-line office product, but also cause owners of B and C properties to investigate other upgraded alternatives. 

“This has been forcing landlords to think about what other uses are there,” said Haines. “Could a property be converted to housing, including student housing? What are the other needs of the neighborhood, and of the city itself? So it’s a really interesting turning point in the market right now where things will have to change, and every market needs a refresh.”

Haines also discussed other positive signs for the sector including an overall increase in return-to-office, and the positive response of tenants to strong sustainability efforts of the sort that Brookfield has been leading.

“We announced last year that we are going to convert the entire U.S. portfolio to zero emissions electricity,” said Haines. “That’s largely through hydro, wind, solar, and nuclear. The New York and DC markets will be 100 percent fueled by zero emissions electricity by the end of this year. We’re really excited about that, and our tenants and investors are excited about it. It’s the wave of the future. By doing this, we are reducing our carbon emissions across the country by 90 percent.”