In a post-COVID commercial real estate market, a defining feature has been the flight to quality. And it’s clear now in a 2025 office market, that this is no longer a trend. The flight to quality has fundamentally reshaped tenant strategies in major cities across the U.S.
Fresh data shows that Class A and Trophy properties are continuing to capture the lion’s share of leasing activity and capital investment.In the first half of the year, 71% of U.S. office transaction volume targeted premium assets and high-quality space.
This is not an investor-only phenomenon. Risk averse tenants, facing hybrid work, competition for talent, and heightened risk sensitivity, are consolidating into newer buildings with advanced amenities, ESG alignment, and flexibility, even at premium rents. Let’s discuss why.
Class A Assets Continue to Outperform
The concentration of activity in Class A and Trophy assets is measurable across the country:
- 138 million square feet (msf) of office leasing occurred in H1 2025, with 71% of $40.8 billion in sales and investment targeting Class A or Trophy product.
- San Francisco recorded its strongest leasing quarter since 2018, up 80.4% quarter-over-quarter, driven by demand for premium spaces. Trophy availability sits well below the overall market average.
- Sublease availability in San Francisco has declined for seven consecutive quarters, evidence that companies are holding onto premium space even as they trim secondary locations.
- In Washington, D.C., Class A campus rents average $68 per square foot, far higher than mid-tier space, yet institutional tenants continue to pursue only the best assets.
The industry data confirms that the gap between premium and mid-tier properties is widening, and tenants are driving the shift.
“Class A office buildings have experienced positive net absorption in most major markets through early 2025, while Class B and C buildings continue seeing tenant departures.” Century 21 Edge
Why Tenants Are Willing to Pay More
The flight to quality persists because the economics of tenant strategy have changed.
In most cases, quality refers not only to a building’s physical condition but to how it supports risk management, workforce priorities, and long-term value.
1. Employee Experience as a Key Factor
Since remote work, the office has shifted from a daily requirement to a strategic tool for collaboration and culture-building.
As one occupier put it, “This migration isn’t merely an aesthetic preference; it represents strategic repositioning by organizations reconsidering the office’s fundamental purpose.” Century 21 Edge
Wellness features (from advanced ventilation to natural light) command 9–12% rental premiums. Yet tenants willingly absorb those costs to create an environment that supports retaining talent in a competitive labor market.
2. Quality = Less Risk in Uncertain Times
In a high interest rate environment and amid ongoing economic uncertainty, tenants are applying investor logic: choosing safer investments in newer buildings while exiting older buildings that present leasing risk.
For these riskier assets, the challenges are compounding:
- Rising Vacancy and Limited Absorption: Data shows that Class B and C buildings continue to post negative net absorption in most major cities, with many sitting well above market-average vacancy. As tenants concentrate into Class A properties, demand for secondary stock is shrinking.
- Capital Expenditure Pressure: Landlords of older buildings face steep reinvestment needs: upgrades to ventilation, ESG retrofits, and digital infrastructure to remain competitive. In many cases, the cost of repositioning exceeds the potential rental upside.
- Liquidity and Valuation Decline: These assets are increasingly seen as riskier investments by both tenants and capital sources.
- Tenant Flight During Renewals: Even long-term occupiers are choosing not to renew in older buildings, preferring to consolidate into fewer, higher-quality locations that deliver safety, flexibility, and employee experience.
The contrast is stark: premium assets continue to post positive absorption and support premium rents, while older properties are at risk of permanent obsolescence. For tenants, the calculus is clear: occupying lower-quality assets introduces uncertainty and reputational risk at a time when predictability and long-term value are paramount.
3. ESG as Standard, Not Differentiator
LEED Platinum and net-zero properties are often are baseline requirements, especially in urban areas. Tenants with national portfolios expect their spaces to align with sustainability commitments, and investors seek the same alignment.
4. Flexibility and Technology Integration
Companies now demand flexible floor plans, adaptable lease terms, and integrated workplace technologies. These capabilities exist almost exclusively in Class A buildings, reinforcing the preference for premium properties.
San Francisco: The Flight to Quality’s Steep Divide
San Francisco illustrates the depth of this tenant-driven migration.
Leasing activity surged in early 2025, with 80.4% quarter-over-quarter growth, but the majority of deals concentrated in Trophy and Class A buildings.
At the same time, sublease availability has fallen for nearly two years straight, a clear indicator that tenants are holding on to premium space despite overall contraction. Because if you zoom out on this flight to quality in San Francisco, you’ll see it has the worst vacancy rate in the country, with some estimates at 30% office vacancy. Any guess what buildings are struggling?
“The trend of flight to quality continues throughout the country, with the share of Class B/C leasing shrinking year-over-year in favor of Trophy/A leasing,” notes one broker in Century 21 Edge active across coastal markets. San Francisco is the sharpest example, but the same story is playing out in New York, Boston, and Washington, D.C.
The gap between premium assets and the rest of the market is becoming structural. Trophy space remains scarce, while older buildings struggle with declining demand and rising obsolescence risk.
Commercial Real Estate is Evolving
Tenant behavior in 2025 demonstrates that quality is not discretionary. Several themes stand out:
- Premium rents are accepted as strategic costs. Tenants are paying 9–12% more for space with the amenities, wellness features, and locations that directly support workforce strategy.
- Portfolio consolidation favors fewer, better buildings. Companies are exiting mid-tier properties and concentrating in top assets where they can maximize collaboration and reduce long-term risk.
- Data-driven decisions dominate. Sophisticated occupiers use analytics to benchmark capital allocation, assess employee preferences, and identify which spaces deliver measurable value.
- Future-proofing is the priority. ESG alignment, flexibility, and integrated technology are treated as non-negotiable. Tenants are positioning their portfolios not for today’s occupancy alone but for resilience in the future.
The Flight to Quality Defines the Market
The flight to quality persists because tenants are using real estate as a lever for risk management and workforce strategy. This is not a temporary preference or a cyclical trend—it is a structural shift in how companies approach the office market.
The result is clear in the numbers: 71% of office capital flows into Class A and Trophy assets, leasing momentum concentrated in premium spaces, and older buildings continuing to lose share. In major cities from San Francisco to Washington, D.C., the gap between high-quality and commodity assets is only growing.
For tenants with large-scale portfolios, the message is unambiguous: in an era of uncertainty, quality is the safe investment. It is where the demand, the capital, and the future of the office market now reside.
And to dominate in this commercial real estate evironment, tenants need more than intuition; they need data-driven insights and portfolio visibility to make confident, strategic decisions. That’s where REoptimizer® delivers value.
The platform allows corporate real estate teams to:
- Benchmark rents and concessions across markets to ensure premium rents are justified by measurable value.
- Model consolidation strategies, helping companies identify where to shed underperforming older buildings and reinvest in newer, Class A assets.
- Quantify risk and opportunity across entire portfolios, turning uncertain times into actionable strategy.
- Track employee experience and utilization data, ensuring that chosen properties deliver on workforce needs as well as financial goals.
REoptimizer® provides the tools tenants require to execute with precision. For organizations rethinking their real estate strategy, the question is not whether the flight to quality persists—it’s how quickly they can align their portfolios with the future of work. Learn more about how REoptimizer® gives your portfolio the edge it needs today.
