Fears of a corporate exodus from New York City are likely to be a recurring feature of New York City Mayor Zohran Mamdani’s term, with each business real estate decision magnified as a potential tipping point signal that the Democratic Socialist’s tax, real estate and wealth policies are pushing businesses away.
The debate was amplified last week amid reports that private equity giant Apollo Global Management was planning to add a second headquarters outside New York City, in a southern U.S. state like Florida or Texas.
Since being elected, Mamdani’s administration has said it will look at every viable option to help raise revenue and fill a $5.4 billion budget deficit for the city, but his preference has not changed from what he ran on: “tax the rich.” That has resulted in a political standoff with New York State Governor Kathy Hochul, who facing her own reelection campaign, has said she will not approve increased taxes on corporations and the wealthy.
“It’s a fragile environment today and we should be careful with this budget,” said Steven Fulop, Partnership for New York City president and CEO, on CNBC’s “Squawk Box” Monday. His group represents corporate, investment, and entrepreneurial firms. In an op-ed he co-authored last week, Fulop warned that any plan to tax the rich and businesses will ripple through the cost equation for every New Yorker. “With New Yorkers already leaving the state in search of a lower cost of living, further raising prices could send even more folks packing and undermine the state’s long-term economic growth,” he argued in the Newsday piece.
“Large companies [are] certainly exploring other options: cheaper labor costs, lower taxes, less political uncertainty,” Vikram Malhotra, managing director, real estate equities at Mizuho, wrote via email.
That’s nothing new. Lower-cost regions like the U.S. South are increasingly attracting both businesses and workers with cheaper real estate, lighter tax burdens, and fewer regulatory hurdles.
Wall Street is diversifying its office space footprint
Finance firms are among the big corporations that have been heading south and expanding into Texas and Florida from both U.S. coasts.
JPMorgan just built a new office building in Manhattan, but has more workers in its Dallas offices than New York City. Cathie Wood’s ARK Investment Management moved from New York City to St. Petersburg, Florida. Wells Fargo is moving its wealth management headquarters from San Francisco to West Palm Beach. Ken Griffin’s hedge fund giant Citadel moved its headquarters from Chicago to Miami, a relocation announced back in 2022. Griffin remains involved in at least one major new project in New York City.
While all these moves reflect a longer-term trend that is a risk for New York City, data from commercial real estate firm JLL covering the first quarter of Mamdani’s term shows that demand for office space and rents in Manhattan are up, while vacancies are down, continuing a trend that was in place at the end of last year before Mamdani’s term began, though overlapped with his winning of the election. JLL says companies are continuing to sign leases and compete for high-quality space in top-tier buildings, which is allowing landlords to push rents higher.
Leasing volume for high-quality office space reached 8.5 million square feet in Q1, while vacancies dropped by 2.2 percentage points to 13.5%, according to JLL. Rents were up by 3.5% year-over-year.
While the commitments to long-term space are notable, the decisions are a mix of maintaining footholds and new growth. American Express announced in February it will build a new headquarters in lower Manhattan. Bank of America signed a 20-year commitment to its New York City office space in March.
“Even with the economic uncertainty increasing almost daily, first quarter 2026 NYC office leasing activity was strong, and a substantial commitment by American Express at 2 World Trade illustrates that New York is still the place where large occupiers need/want to be,” said JLL vice chairman Evan Margolin in a statement.
An AI boom inside Manhattan building leases
Another major factor in the Manhattan office market’s strength is the AI boom. According to JLL, leasing activity from AI companies in the first quarter represented roughly half of 2025’s total leasing volume. JLL described the AI rush as one typified by firms racing to “lock in space.”
Among the biggest AI deals in Q1: Nscale Global Holdings’ lease at One Vanderbilt, which JLL says was the highest rent ever recorded in New York ($320 per square foot) and the first time an AI company earned that distinction. Booming legal AI firm Harvey signed a 92,000-square foot expansion at One Madison Ave.
But the AI boom implies another source of uncertainty for the city’s real estate future. “The land grab for talent and space is immediate, but uncertainty is driving how they commit,” JLL noted in its quarterly review. “AI companies in New York are taking significantly more space than their current headcount requires, in anticipation for the hiring they expect to do.”
JLL added that a notable feature of these leases is AI firms “demanding flexible lease structures with built-in adjustment mechanisms and reconfigurable facilities.”
The AI activity, Margolin warned, “is a trend that is reminiscent of the dot com boom (and we can all remember how that ended).” But he added “this time they’re clearly focused on top-tier buildings in prime locations, which is pushing the class A market to new highs.”
Business leaders are cautious, weighing the city’s costs as new taxes are debated. Companies that rely on access to talent, capital, and clients may continue to stay in New York. At the same time, the next office, the next team, or the next expansion is more likely to land somewhere cheaper. “That’s the reason why you will see some sort of gradual exodus over time,” Fulop told CNBC.
Even with rents and net absorption of office space up, and vacancies down, JLL described the overall market demand as “stable” and the development activity as “measured.”
Any decision by a big corporation to leave New York has an impact on the city’s economy, with the risks including higher unemployment and lower tax revenue, according to Malhotra. And for the office real estate market specifically, higher vacancy and lower rent growth pressures the businesses of commercial real estate companies, he added.
Fulop warned that policy decisions made now could determine whether New York captures future growth or continues to lose on the margins. “I think that disconnect is largely because of politics, and that’s the kind of thing that we’ve got to push back on,” he said.
