Has flight to quality run its course in U.S. offices?

Prior to the pandemic, occupiers were flocking to higher quality office spaces to attract top talent. The trend was exacerbated by COVID, as higher-quality office spaces started being used to lure existing employees to come into the office.
Historically, trophy and class A office spaces have accounted for roughly 70 to 75% of leasing activity. However, office leasing activity across U.S. gateway markets has favored class B and C spaces to a historically high degree (more than 40%), pushing trophy and class A down to just under 60% year to date.
Most gateway markets are still experiencing flight to quality. Chicago, Manhattan and Houston have seen over 70% of leasing activity occur in trophy and class A spaces year to date. On the other hand, Washington, D.C. and Boston experienced a blip in the same assets of 29.2% and 34.7%, respectively. In Washington, D.C., the limited availability of new trophy assets amid government renewals influenced the low activity. In Boston, increased lease rollovers yielded higher class B leasing activity; however, experts anticipate an uptick in trophy and class A spaces in the second half of the year.

March 25, 2024