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Handful of Prime Office Buildings Thrive as Broader Sector Struggles
A small subset of prime office properties is thriving while much of the sector struggles to adapt from high interest rates, inflation and reduced demand due to hybrid work, CBRE said Monday. The 830 properties identified as prime comprise just 8% of the U.S. office market by square footage and just 2% by building count. It’s a more exclusive designation than Class A, which spans 61% of the U.S. office market.
Average vacancy in the prime buildings in this year’s first quarter (14.8%) was 4.5 percentage points lower than the rest of the market, compared to a 1.9-percentage-point advantage in mid-2018. Prime buildings attracted an average rent premium of 84% more than the rest of the market in the first quarter, up from 60% in mid-2018.
Additionally, prime buildings cumulatively registered 48 million square feet of positive net absorption from 2020 to 2024. That compares to the rest of the office market logging negative net absorption of 170 million square feet over the same time period.
“The widening gap between prime office space and commodity office space reflects commercial and societal shifts of recent years,” said Mike Watts, CBRE president of Americas investor leasing. “This new analysis is one of the clearest indicators yet of that widening gap.”
Pictured: SL Green Realty Corp.’s One Vanderbilt in Midtown Manhattan.
- ◦Lease
