There’s no shortage of doom-and-gloom coverage about the office market. Vacancy records. Remote work. Tech layoffs. You’ve read the headlines. But here’s what a lot of that coverage misses: the office market isn’t dying, it’s splitting in two. And one half of it is doing remarkably well.
Class A commercial real estate office space — specifically, well-located, well-amenitized, modern buildings is outperforming the rest of the market by a wide margin. While Class B and C properties bleed tenants, top-tier office buildings in the right cities are posting positive absorption, rising rents, and tightening supply. That’s not a rumor. That’s what the numbers show right now.
If you’re an investor, a business owner weighing a lease, or someone trying to make sense of CRE in 2025 and 2026, understanding why Class A holds its ground is one of the most important things you can get your head around.
The Market Has Officially Split
When people say “office is struggling,” they’re usually talking about the broad market and they’re not wrong about the broad number. Office property vacancy in the U.S. hit a record 19.6% in Q1 2025. That’s a real and serious problem for a lot of property owners.
But averages hide the story. The same data shows that Class A trophy buildings in prime locations are sitting around 500 basis points below that market average in vacancy. In other words, there’s one market for quality buildings and another market for everything else and those two markets are diverging fast.
Class A office rents in 2025 are roughly 84% higher than non-prime Class B/C properties, and tenants keep paying that premium. Meanwhile, Class A deal volume grew 34% year-over-year in 2025 as capital concentrated on higher-quality, well-located assets. That’s not a market in retreat. That’s a market where smart money is doubling down.
The “Flight to Quality” Is More Than a Buzzword
The phrase “flight to quality” has become CRE industry shorthand, but what’s actually driving it matters. It’s not just about nicer lobbies. Companies are using their physical offices as recruiting and retention tools. In a hybrid work environment, when you’re asking employees to commute in two or three days a week, the office better be worth the trip.
“Organizations are no longer evaluating office space purely on cost — they are assessing how environments support culture, collaboration, and recruitment.”
— CBIZ Gibraltar Real Estate Services, 2026
That shift in thinking, from cost center to talent magnet — is why companies are actively trading up. Law firms, financial services firms, venture-backed startups, and media companies are moving from dated buildings to trophy towers and renovated Class A properties, not downsizing into cheaper space. They’re paying more per square foot on purpose, because the alternative is asking their people to come into a 1990s-era building with no amenities and wonder why nobody shows up.
JLL’s Q4 2025 data found that leasing activity is heavily concentrated in newer, highly-amenitized Class A buildings and vibrant mixed-use districts. Buildings that offer wellness areas, quality food options, flexible floor plates, and genuine transit access are winning. Buildings that don’t have those things are competing on price — and losing.
Class A Commercial Real Estate Office Location Is Still the Deciding Factor
Not all Class A office is created equal. The building matters, but so does where it sits. This is where a lot of investors and tenants get the story wrong, they assume “Class A in any city” equals “safe bet.” That’s not how it works.
High-quality assets in vibrant mixed-use districts consistently attract tenants, while commodity buildings in office-centric or lower-activity districts lose them — even when those commodity buildings are technically Class A. Proximity to restaurants, transit, residential neighborhoods, and street-level retail changes the equation completely. A great building in a dead district is still a hard sell.
CBD office buildings with strong transit access and modern amenities are emerging as the clearest winners in the current market correction. That’s not surprising to anyone who works in the space. What’s new is how sharply the gap is widening between those buildings and everything else.
Markets like Manhattan are illustrative. Manhattan’s overall availability rate dropped to 16.4% in Q2 2025 — the lowest in over four years — while new office leasing hit 8.4 million square feet, the highest quarterly total since before the pandemic. That’s not a dead market. That’s a market healing itself from the top down.
Supply Is Quietly Drying Up
Here’s something that rarely makes the headlines: there is very little new Class A office being built right now. Only 5.6 million square feet of office space delivered nationwide in Q1 2025 — the lowest quarterly total in over 15 years — with just 33.5 million square feet under construction, down sharply from a peak of nearly 160 million square feet in 2019.
High construction costs, expensive financing, and cautious developers mean that the pipeline for new Class A product is thin through 2026 and beyond. Meanwhile, demand for that specific type of space is growing. Industry experts are warning that top-tier trophy buildings could essentially run out of available space within a few years — creating a supply squeeze that will benefit current owners of well-positioned Class A assets.
For investors, that dynamic is worth paying attention to. When demand is concentrated and new supply is constrained, owners of quality assets gain leverage. Rents hold. Vacancies stay low. Long-term leases have become easier to negotiate. That’s the environment forming right now at the top of the office market.
What Smart Investors Are Doing Right Now
The bifurcation of the office market has created a pricing opportunity. Distressed sales of lower-quality office properties are at their highest levels in over a decade, and price corrections have opened the door for new capital to enter the market. But the smart money isn’t chasing distressed deals indiscriminately, it’s looking for quality assets in the right locations that may have been caught up in a broad-brush selloff.
There’s also an opportunity in repositioning. For developers and investors willing to upgrade lower-tier properties to meet evolving tenant expectations, opportunity exists in the middle of the market as well. The line between Class B and Class A isn’t always about the building’s age, sometimes it’s about investment and intent. Understanding how to properly assess those opportunities is its own skill, the ICRE team breaks down exactly how investors should evaluate commercial real estate in today’s environment.
J.P. Morgan’s head of commercial real estate noted that 2026 is strong from both a capital and fundamental standpoint, with more transactions anticipated across the year. That’s a significant shift in sentiment from just two years ago. Notably, it’s not just the big institutional plays moving — smaller CRE deals are actually closing faster than institutional assets right now, giving private investors a real timing advantage.
The Takeaway for Investors and Tenants In Class A Commercial Real Estate Office
If you’re a tenant, the lesson here is straightforward: landlords of quality buildings are more willing to negotiate favorable terms with large tenants, rather than risk vacancy, but the best spaces won’t stay available for long. Companies that wait too long to commit to premium space in strong markets may find themselves locked out as supply tightens further. For those evaluating options across the Phoenix metro specifically, this side-by-side look at office space in Scottsdale, Tempe, and Mesa is a useful starting point for understanding the tradeoffs between submarkets.
If you’re an investor, the lesson is about precision. The office market overall still carries real risk. But Class A assets in well-connected, economically active locations, particularly those tied to industries like finance, law, tech, and healthcare, are showing durability that the broad headlines don’t reflect. The key is knowing which markets, which submarkets, and which asset types are genuinely positioned for the next cycle.
The office isn’t dead. The bad office is dying. There’s a meaningful difference, and investors who understand that distinction have a real edge right now.
How the ICRE Investment Team Can Help With Your Class A Commercial Real Estate Office
At ICRE Investment Team, we specialize in helping investors cut through the noise and find the commercial real estate opportunities that actually make sense, including well-positioned Class A office assets in markets with real fundamentals behind them.
We track the data, know the submarkets, and work with investors at every level to identify deals that align with their goals. Whether you’re entering commercial real estate for the first time or repositioning an existing portfolio, our team has the insight and relationships to help you move with confidence.
The office market is complex right now — but complexity creates opportunity for those who know where to look. Reach out to the ICRE team and let’s talk about where the real opportunities are.
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