Concerns about an exodus of businesses from New York City are likely to recur during New York City Mayor Zoran Mamdani’s term, with each corporate real estate decision widely cited as a signal of a tipping point where Democratic Socialists’ tax, real estate, and wealth policies may be pushing businesses away.
The debate began last week when private equity giants Apollo Global Management planned to add a second headquarters outside New York City and in southern U.S. states such as Florida and Texas.
Since being elected, Mamdani’s government has said it would consider all viable options to raise revenue and close the city’s $5.4 billion budget deficit, but his preference for “taxing the wealthy” remains unchanged. That has created a political conflict with New York Governor Cathy Hochul, who is seeking re-election and has said she will not approve tax hikes on corporations and the wealthy.
“Today’s environment is fragile, and we should be cautious about this budget,” New York City Partnership President and CEO Stephen Fulop said Monday on CNBC’s “Squawk Box.” His group represents corporate, investment and entrepreneurial companies. In a co-authored op-ed last week, Mr. Fulop warned that plans to tax the wealthy and corporations would spill over into the cost equation for all New Yorkers. “New Yorkers are already leaving the state for a lower cost of living, so further price increases could send even more people packing and hurt the state’s long-term economic growth,” he argued in a Newsday article.
“Large companies are certainly looking at other options: lower labor costs, lower taxes, less political uncertainty,” Vikram Malhotra, managing director of real estate equities at Mizuho, said in an email.
It’s nothing new. Low-cost regions like the southern United States are increasingly attracting both businesses and workers because of their cheap real estate, light tax burdens, and low regulatory hurdles.
Wall Street is diversifying its office space footprint
The financial company is one of the large companies moving south from both coasts of the United States and expanding into Texas and Florida.
JP Morgan has just built a new office building in Manhattan, but has more employees in its Dallas office than in New York City. Cathie Wood’s ARK Investment Management has relocated from New York City to St. Petersburg, Florida. wells fargo Relocation of wealth management headquarters from San Francisco to West Palm Beach. Ken Griffin’s hedge fund giant Citadel has moved its headquarters from Chicago to Miami, with the move announced in 2022. Mr. Griffin remains involved in at least one major new project in New York City.
All of these developments reflect long-term trends that pose risks to New York City, but data from commercial real estate firm JLL covering the first quarter of Mr. Mamdani’s term shows demand for office space and rents in Manhattan is increasing while vacancies are decreasing, continuing a trend that has been in place since late last year, before Mr. Mamdani’s term began, even though it coincided with his election victory. JLL says companies continue to sign leases and compete for quality space in prime buildings, allowing landlords to increase rent prices.
According to JLL, the rental volume of high-quality office space reached 8.5 million square feet in the first quarter, while the vacancy rate decreased by 2.2 percentage points to 13.5%. Rent increased by 3.5% compared to the previous year.
Long-term space efforts are noteworthy, but the decision is a combination of maintaining foothold and new growth. American Express announced in February that it would build a new headquarters in Lower Manhattan. Bank of America signed a 20-year contract for office space in New York City in March.
“Despite economic uncertainty increasing almost daily, New York City office leasing activity remained strong in the first quarter of 2026, and the significant commitment by American Express at Second World Trade shows New York remains a location that large occupiers need or want,” JLL Vice Chairman Evan Margolin said in a statement.
AI boom in Manhattan building leased land
Another big factor in the strength of Manhattan’s office market is the AI boom. Leasing activity by AI companies in the first quarter accounted for about half of total leasing volume in 2025, according to JLL. JLL described the AI rush as being typified by companies rushing to “secure space.”
One of the biggest AI deals in the first quarter was Nscale Global Holdings’ lease at One Vanderbilt, which JLL says is the highest-ever rent in New York ($320 per square foot) and the first time an AI company has earned that honor. Fast-growing legal AI company Harvey has signed a 92,000-square-foot expansion at One Madison Ave.
But the AI boom hints at another source of uncertainty for the city’s real estate future. JLL noted in its quarterly review that “talent and space acquisitions are imminent, but uncertainty is driving their commitment.” “New York AI companies are significantly outpacing the space needed by their current staff in anticipation of anticipated hiring.”
JLL added that a notable feature of these leases is that AI companies are “demanding flexible lease structures with built-in adjustment mechanisms and reconfigurable equipment.”
Margolin warned that AI activity is “a trend reminiscent of the dot-com boom (and we all remember how that ended).” But, he added, “this time we’re clearly focused on first-class buildings in prime locations, and that’s driving the Class A market to new heights.”
As new taxes are debated, business leaders are cautious and weighing the cost to the city. Companies that rely on access to talent, capital and customers are likely to remain in New York. At the same time, your next office, next team, or next expansion is more likely to land in a cheaper location. “That’s why we’re seeing a sort of gradual population exodus over time,” Fulop told CNBC.
Despite rising rents and net absorption of office space and declining vacancies, JLL said overall market demand remains “stable” and development activity is “measured.”
Malhotra said the decision by large companies to leave New York would have an impact on the city’s economy, with risks such as higher unemployment and lower tax revenues. And, he added, particularly in the office real estate market, rising vacancy rates and declining rent growth are weighing on business for commercial real estate companies.
Fulop warned that policy decisions made now could determine whether New York State captures future growth or remains in the red. “I think the main cause of the disconnect is politics. That’s the kind of thing we have to push back on,” he said.
