The bifurcation between prime and Class B and C office spaces in gateway markets continued its trajectory in the first half of the year, albeit at a slightly tempered pace.

According to a new report by CBRE, landlords of Class A and A+ office buildings in more than 12 markets saw their effective rents increase slightly in the first six months of the year, while Class B and C offices experienced a slight decline over the same period.

The aggregate performance of the office sector reflects several trends that began to take shape in 2021, CBRE said. High interest rates coupled with the shift to hybrid and remote work arrangements have decreased the overall demand for office space in gateway markets after the pandemic. This paradigm, along with the long-term trend in the office sector, has persuaded landlords across all types of office buildings to offer generous concessions such as tenant improvement allowances and months of free rent.