Flight to quality: the strategic divide in global real estate

From San Francisco to London to Tokyo, businesses are flocking to high-quality real estate. No occupier, investor or developer can escape the implications of this ‘flight-to-quality’ movement. Nearly all property types are impacted by this trend, which entails a rising demand for top-tier space.

What’s driving the flight to quality?

Businesses have always sought quality real estate, but ‘quality’ space looks different than it did even five years ago – and, not surprisingly, varies across asset type, space function and industry.

Several factors have intensified demand for modern, well-maintained buildings in prime locations.

1. Economic volatility

With geopolitical tensions rising and a volatile global economy, investors, developers and tenants are skewing toward risk-averse and cost-conscious decisions. The most likely strategy to preserve value and maintain stable occupancy is linked to investing in core assets within established, high-demand locations.

It can be challenging to make major updates when your top priority is uptime. But one global tech manufacturing giant is rejigging their portfolio in a phased approach that allows it to meet critical deadlines while reducing their footprint in ageing facilities. The space reductions are balanced with an investment in the remaining footprint to enhance operational excellence and employee experience. Or, when relocating, the company targets newer assets in submarkets with better buildings, more amenities and proximity to public transportation.

2. Focus on talent attraction and retention

Employee expectations for the workplace are higher than ever. Competing for talent today requires not just a well-designed, conveniently located office, but a tailored experience to meet individual needs across generations and workstreams. Companies are amping up employee experience everywhere – in both offices and specialised facilities like research and innovation hubs, factories and data centres. But this goes beyond what happens when an employee is on board: talent sourcing has become a major factor in setting up or expanding space in a particular location.

3. Changing workplace needs

With office occupancy still rebounding from the early 2020s, business leaders know they need high-quality workplaces to ramp up in-person attendance and fulfil the new purpose of the office. Employees commute to the office for different reasons, some come to find connection and be inspired, while others need a productive place to work away from home’s distractions. That means offices need a variety of spaces for different types of work.

4. Sustainability requirements

According to Climate Impact Partners’ research, locating in green, top-tier buildings is non-negotiable for the 45% of Fortune 500 companies that plan to be net zero by 2050, and for the many other companies striving to appeal to eco-conscious talent and customers. Not only are environmentally friendly buildings good for your rep among execs and shareholders, but energy efficiencies also provide tenants an avenue for savings on premium space leases. But there’s a big supply and demand issue: JLL research found that in 2025, at least 30% of market demand for low-carbon space in 21 cities globally will not be met. This gap could exceed 70% by 2030.

5. Technological advances

Today’s office occupiers want smart buildings that support hybrid work, seamless connectivity and digital tools, often narrowing their options to newer buildings in central business districts and innovation hubs. Industrial tenants, too, need high-tech buildings to support increased uptime demands, use of robotics and same-day delivery logistics.

A global medical device manufacturer revolutionised its portfolio strategy by implementing a unified ‘One Team’ approach across its expanding R&D and manufacturing footprint. Data-driven location decisions optimised site selection in competitive life sciences markets while centralising management of 16.7 million square feet across 50 global locations. The implementation of performance dashboards comparing metrics across facilities generated $10.6 million in savings while supporting the company’s mission to improve patient outcomes.

Implications of the flight to quality

The gap between high-quality and lower-quality assets is widening. Many cities have seen an uptick in leasing demand for Class A assets, the newest, highest quality properties, while second- and third-tier space sits available. Older buildings in the U.S. have lost over 400 million square feet of occupancy since 2020, while buildings constructed in the past decade gained nearly 150 million square feet of occupancy.

The shortage of high-quality space and the increase in stranded assets are not changing trajectory any time soon, particularly in the office market. JLL Research estimates that between 322 to 425 million square meters of existing office space in 66 global markets will likely require substantial capital expenditure over the next five years to remain viable. Expect to see more redevelopment and retrofitting activity, as well as rising demand in emerging hot spots.

Strategies to get ahead in today’s market

Driven by a need to attract and retain talent, manage risk, meet sustainability goals and support digital workplaces, tenants and investors are rethinking their portfolio and location strategies. A flexible and agile approach is essential to prepare your portfolio for whatever lies ahead.

One global financial services firm leveraged a data-driven portfolio strategy to generate significant liquidity while implementing hybrid work. Facing the challenge of determining which properties to retain, release or downsize post-pandemic, the company partnered with JLL consulting experts to analyse real-world attendance data beyond simple averages. This scientific approach revealed that while peak attendance reached 65% at one location, that level of usage was rare. Most of the time, attendance rates were closer to 36%.

Upon following recommendations for their location and portfolio strategies, the firm achieved $120 million in annual savings and reduced its footprint by two million square feet. The optimisation freed capital to relocate headquarters to a modern facility half the size of their previous space, balancing immediate cost efficiency with long-term business flexibility.

Engaging executive leaders early in strategic conversations and bringing data-driven insights are critical for confident decision-making. A skilled partner can help facilitate those discussions, bringing the data and tools needed to assess your portfolio, as well as identifying your options.

Optimising location strategy

The shift to high-quality real estate is about more than amenities and space design. It’s also about the address. Where you choose to locate sends a powerful signal to customers, talent, and partners; it’s like a business card that illustrates your values and what your brand represents. Location decisions are typically long-term and involve risk and substantial capital expenditures, so it’s critical to get it right.

Quality data is essential to optimising site locations. Depending on your unique needs, you may need to examine population trends, workforce demographics, commute patterns, risks, real estate costs and many more data points.

A leading U.S. health system revitalised its growth strategy by employing advanced location analytics to guide expansion decisions. Using sophisticated mapping technology, the organisation layered patient demographics, physician density, healthcare spending patterns and transportation data to identify underserved markets with high demand potential. This precision targeting allowed them to avoid oversaturated areas while strategically positioning new facilities where patients most needed access to care. The data-driven approach has supported over 150 successful transactions, transforming the organisation into one of the region’s largest healthcare providers.

In an era that is defined by competition, uncertainty and rapid change, the flight to quality is becoming a business imperative real estate executives can not ignore.

Read more about how to stay competitive in the real estate space here.