The flight to quality is fueling growing divisions in the office sector

Companies are looking for the best office amenities to recruit and retain talent.

While much of the office building sector is struggling to adapt to high interest rates, inflation and reduced demand due to hybrid working, the top floor of office buildings is thriving. Prime office rents rose to 84% in the first quarter and the vacancy rate was 14.8%, 4.5 percentage points lower than the rest of the market, and the gap increased from 1.9 percentage points in mid-2018.

CBRE’s analysis of office markets in 57 U.S. cities shows that continued demand for prime space and shrinking investment scope mean that prime rents will continue to rise and will be higher compared to non-prime space. This trend highlights the preference for new, high-quality buildings that are attractive to employees and increase office attendance.

The study identified 830 properties that fit into this top-tier office building category, representing just 2% of U.S. office buildings. About 60% of these buildings were built in the last decade, while the rest have recently undergone major renovations. The best buildings feature high-quality design, wellness standards, a rich set of amenities, and are located in walkable neighborhoods close to shopping and transportation.

The next floor of buildings, after highly occupied prime spaces, will likely benefit from excess demand, particularly in vibrant mixed-use neighborhoods, CBRE said. A 2024 tenant sentiment survey found that the most sought-after amenities in buildings included top-rated indoor air quality amenities, electric vehicle charging stations, ample parking and/or bike storage, shared conference space, technology-enabled building controls and sustainability features.

Notably, nearly 60% of respondents to the survey indicated they were considering moving to higher-quality space. However, occupiers looking for prime space will have limited options due to a sharp decline in new prime deliveries starting in 2025, CBRE said. Some 22 million square feet of prime office space was under construction in the first quarter of this year, with completion dates now extended to 2027.

Prime buildings saw positive net absorption of 48 million square feet from 2020 to 2024, which means more space newly occupied than vacated. By comparison, net absorption in other buildings is 48 million square feet, which is more space vacated than newly occupied – amounting to 170 million square feet. office market.

“The growing gap between premium and standard office space reflects the commercial and social changes that have taken place in recent years. This new analysis is one of the clearest indicators yet of the size of this widening gap,” said Mike Watts, president of Americas Investor Leasing at CBRE. “Companies looking to recruit and retain talent choose the highest quality office space – prime space – to make in-person work as efficient and enjoyable as possible for employees and customers.”