While much of the office building sector struggles to adapt to high interest rates, inflation and reduced demand due to hybrid work, a top tier of office buildings is thriving. Rent premium for prime office space increased to 84% during the first quarter and vacancy rates were 14.8%, 4.5 percentage points lower than the rest of the market, a gap that has widened from 1.9 percentage points in mid-2018.

Continued demand for prime space and a shrinking construction pipeline mean prime rents will continue to rise and command a premium over non-prime space, according to an analysis of office markets in 57 U.S. cities conducted by CBRE. The trend underscores a preference for new, high-quality buildings that appeal to employees and increase office attendance.

The study identified 830 properties that fit this top echelon of office buildings, representing just 2% of U.S. office buildings. About 60% of these buildings were constructed in the past decade, while the rest have recently undergone extensive renovations. Prime buildings have quality design, wellness standards, a strong mix of amenities and are in walkable neighborhoods near retail and transit.