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The trend of “flight to quality” has gained momentum since the pandemic started and employee work patterns shifted to an increasingly virtual model. And the reimagination of office space, along with virtual work trends, will only accelerate tenant moves to prime office properties. The virtual-work-induced shortfall in office demand is felt almost exclusively in non-prime buildings.

• Demand has shifted to the top of the market, at the direct expense of more commoditized office stock. The average prime net absorption rate from Q2 2021 to Q2 2022 for five observed downtowns is 0.2%, compared with -0.7% for the non-prime assets in these downtowns.
• Rents for prime assets have continually outpaced those of non-prime assets, with cumulative prime rent growth over 13% since 2018.
• After Q1 2020, the vacancy rate for non-prime assets increased much faster than that of prime assets. The non-prime group’s vacancy rate increased 8.2% while the prime group increased 5.1% from Q1 2020 to Q1 2022.
• A high-quality building with sustainable features will carry less transition risk going forward, making it more valuable than its peers and easier to attract environmental-conscious tenants and investors.
• The competitive advantage of individual prime buildings will vary by market depending on current and future inventory of top-quality buildings.