For much of the past few years, the office market has been the subject of cautious headlines. Hybrid work, shifting tenant expectations, and rising construction costs left many wondering whether the demand for traditional office space had permanently changed. Yet, amid all the uncertainty, one segment is quietly regaining traction: Class A office space.
Premium offices – those with high-end finishes, strong amenities, and prime locations are beginning to set the pace for a market recovery. The question is, can these buildings pull the broader office sector forward?
What Makes Class A Different?
Class A offices are at the top tier of commercial office real estate. They are typically:
- Modern or recently renovated with efficient layouts and premium finishes.
- Located in prime areas – close to transit, dining, and lifestyle amenities.
- Amenity-rich with features like on-site gyms, collaborative lounges, conference centers, and advanced technology infrastructure.
- Professionally managed to ensure consistent tenant experience.
While Class B and C offices often compete primarily on price, Class A space competes on value, offering tenants not just square footage but also prestige, comfort, and retention power for their workforce.
Why Tenants Are Leaning Toward Premium
1. Recruitment & Retention
Companies know that office space is part of their brand. In a competitive labor market, offering a sleek, well-located office helps attract and retain talent. Employees are more likely to commute to a workplace that feels modern, comfortable, and convenient.
2. Hybrid Adaptation
Fewer employees are coming in five days a week. When they do, tenants want to make it count. That means upgrading to Class A spaces that emphasize collaboration areas, wellness amenities, and open designs over outdated cubicles.
3. Flight to Quality
Even as overall office demand has cooled, many tenants are trading up. Rather than hold onto larger footprints in mid-tier buildings, companies are downsizing and reallocating budgets toward smaller but higher-quality spaces. Over the past decade, a clear trend has emerged: capital is flowing south. Among them, Arizona stands out as a magnet for out-of-state commercial real estate investors because it provides fertile ground for all three – growth, stability, momentum.
4. Technology-Ready Environments
From strong internet infrastructure to energy-efficient systems, Class A offices are designed to support the modern workplace. This gives tenants less operational headache and more reliability.
Market Signals Pointing to a Comeback
In markets across the U.S., absorption trends show that Class A is outperforming other categories. Vacancy rates remain higher than pre-2020, but landlords of premium buildings are often seeing steadier leasing momentum compared to their Class B and C counterparts according to National Association of Realtors.
Rents are also holding stronger at the top of the market. While landlords of mid- and lower-tier spaces are discounting heavily, Class A owners have been able to keep pricing relatively stable, especially in buildings offering newly renovated space.
In many metros, sublease activity has centered around Class B buildings, while demand for Class A is driven by industries like technology, finance, legal, and healthcare sectors that prioritize high-quality work environments.
Challenges That Remain
Of course, the rebound for Class A is not without headwinds.
- Construction Costs: With build-out and tenant improvement expenses rising, some tenants are cautious about custom spaces, even in premium buildings.
- Higher Asking Rents: Class A doesn’t come cheap. Tenants willing to pay for it are often those with strong balance sheets or strategic need for a flagship location.
- Geographic Disparities: Not all markets are created equal. Urban cores with revitalized amenities are outperforming, while suburban Class A may face slower leasing unless tied to healthcare or mixed-use hubs.
What This Means for Owners and Investors
The resilience of Class A underscores a clear lesson: quality is winning out over quantity. Investors and landlords who double down on upgrades, amenities, and management practices are more likely to weather market uncertainty.
For investors, this means:
- Repositioning older assets through capital improvements to appeal to tenants seeking modern features.
- Targeting medical and professional tenants, who tend to favor long-term stability and value the infrastructure of premium buildings.
- Considering mixed-use integration, Class A office is part of a broader ecosystem of retail, hospitality, and residential offerings.
Looking Ahead
The comeback of Class A offices won’t solve every challenge in the office sector. But it does highlight an important dynamic: companies are still willing to pay for quality when it aligns with their culture and employee experience.
As the market evolves, Class A may very well be the catalyst that steadies the office market and reshapes expectations for the future of workspaces.
At the ICRE Investment Team, we see firsthand how tenants and investors are navigating this “flight to quality.” Our focus is on helping clients identify opportunities – whether it’s upgrading to premium office space, repositioning an existing asset, or evaluating market trends to stay ahead.
The recovery story is still being written, but one thing is clear: premium office space has a role to play in leading it. If you’d like to explore how Class A opportunities might fit into your strategy, the ICRE Investment Team is here to guide you with insights, market expertise, and a commitment to your success.
