How it works
When companies need less space overall, many use the change to trade up: they take a smaller area in a better building rather than the same area in an older one. That moves demand to the top of the market, so prime buildings hold their rents and occupancy while commodity buildings see vacancy rise.
What counts as quality has widened. Location and transit access still matter, but tenants also weigh energy performance and sustainability ratings, air quality, amenities, flexible floor plates and building technology. Older buildings that need major upgrades to meet those standards are the most exposed.
For an occupier the trend has two sides. Prime space is in demand, so rents and competition are higher. Better space can also help draw people in and let a company hold less of it, but only if the space is used. That is why a move up in quality is usually paired with measured attendance and a clear plan for how teams will use the new space.
How to measure it
- Compare cost per occupied seat, not only rent per square foot, when weighing a smaller prime space against a larger older one.
- Measure current peak occupancy before sizing the new space, so trading up does not also mean overbuying.
- Check sustainability ratings and planned upgrades for every building you consider.
Examples
- A company leaving three floors of an older tower takes two floors in a newer building with better transit access and energy ratings.
- A landlord refurbishes an older building with new systems and amenities to compete for tenants who are trading up.
Benchmarks
In CBRE's study of five major U.S. downtowns, prime office buildings recorded cumulative rental growth of 13.4% from 2018 to 2021, against 2.5% for non-prime Class A buildings.
CBRE, The Flight to Quality Quantified (2022)In the same study, the non-prime vacancy rate rose 8.2% from Q1 2020 to Q1 2022, while the prime group's rose 5.1%.
CBRE, The Flight to Quality Quantified (2022)
Common mistakes
- Trading up to prime space while keeping the old desk count, which makes every empty desk more expensive.
- Judging a building on amenities alone, without checking whether it suits how your teams work.
- Assuming older space is always the cheaper option, when upgrade needs and weak demand can raise its long-term cost.
How Kadence helps
Kadence Workplace Insights measures attendance, occupancy and peak days in the current space, so a team moving to a prime building can size it to real demand. SpaceOps scenario planning compares options side by side, such as fewer floors in a new building against the current footprint, before a lease is signed.
Workplace occupancy · Scenario planning · Office space planning guide
Frequently asked questions
What is flight to quality in commercial real estate?
It is the movement of tenants from older or lower-grade buildings into the best buildings in a market. Prime buildings keep their rents and occupancy, while demand for commodity space weakens, which widens the gap between the two.
Why are companies moving to prime office space?
Many need less space than before, so they can afford a better building for a smaller area. Better locations, amenities and sustainability credentials help give people a reason to come in, support recruitment and meet corporate climate targets.
What makes an office building prime?
Prime usually means the best-located space in a market, close to transit, built or refurbished to a high standard, with strong environmental and wellness credentials and good amenities. Definitions differ by market, and the bar rises as new buildings are completed.
Does flight to quality mean companies need more space?
Not usually. Most companies trading up take less space in a better building. The risk is paying prime rent for desks nobody uses, so size the new space from measured peak attendance rather than headcount.
Related terms
- Corporate real estate (CRE) The buildings and leases a company occupies for its own operations, and the team that plans and manages them.
- Destination office An office designed to be worth the commute, drawing people in with space, amenities and experiences rather than mandates.
- Real estate portfolio optimization Matching the buildings, floors and leases an organization holds to the space its people actually need.
- Office right-sizing Matching the amount and type of office space to how people actually use it, based on measured demand rather than headcount.
Sources
Kadence editorial team · Last reviewed