The flight to quality real estate takes off
A human-centric workplace strategy shakes up the competition for top talent
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.
Staying competitive requires a rethink of your portfolio and location strategies. Understanding what’s driving this trend will help you get ahead in your quest for quality real estate.
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.
“For some companies, quality is all about location or proximity to certain demographics, while for others it’s about sustainability, amenities, infrastructure or design. The recipe for success is a mix of these elements,” says Lorenzo Piacentino, JLL Consulting Services senior director, EMEA Lead, Portfolio Strategy.
Several factors have intensified demand for modern, well-maintained buildings in prime locations.
Economic volatility
Focus on talent attraction and retention
Changing workplace needs
Sustainability requirements
Technological advances
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 phased approach that allows them to meet critical deadlines while reducing their footprint in aging 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.
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 specialized facilities like research and innovation hubs, factories and data centers. 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.
With office occupancy still rebounding from the early 2020s, business leaders know they need high-quality workplaces to ramp up in-person attendance and fulfill the new purpose of the office. Employees commute to the office for different reasons now. 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.
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/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.
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 revolutionized its portfolio strategy by implementing a unified "One Team" approach across its expanding R&D and manufacturing footprint. Data-driven location decisions optimized site selection in competitive life sciences markets while centralizing 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.
“The insights we can get from technology are supporting more efficient management of CRE,” says Steve Carlos, JLL Consulting Services senior director and AMER lead for Location Strategy. “This in turn is helping organizations optimize their footprints, cut costs to focus investments in core assets, and identify bold yet achievable targets. This helps CRE leaders identify immediate opportunities, while also informing their mid- and long-term real estate strategy.”
Market 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. Case in point: 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.
“There have been some casualties as occupiers reduced their footprints to smaller, fewer but better locations,” says Piacentino. “Increased vacancies in second and third-tier assets create risk, but also opportunity.”
The shortage of high-quality space and the increase in stranded assets is 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.
“You may not know what will happen in the future, but you can at least be prepared with a few scenarios mapped out,” says Carlos, who has specialized in location intelligence for JLL clients for more than a decade.
One global financial services firm leveraged 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 analyze 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 percent. Upon following recommendations for their location and portfolio strategies, the firm achieved $120 million in annual savings and reduced its footprint by 2M s.f. The optimization 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.
Aligning your portfolio with business priorities
Savvy executives know that quality real estate is essential to accomplishing business priorities. Now is the time to take a hard look at your portfolio to see if you have the right assets to achieve goals related to growth, cost optimization, risk mitigation, flexibility and sustainability.
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.
Optimizing your 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 illustrating 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 optimizing 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 revitalized its growth strategy by employing advanced location analytics to guide expansion decisions. Using sophisticated mapping technology, the organization 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 organization into one of the region's largest healthcare providers while ensuring new locations maximize both patient accessibility and business performance.
“You can have a beautiful building in a great city, but does it align with your business requirements? Does it offer access to the right workforce, business partners and infrastructure? That’s where data and location analytics come in,” says Carlos.
Better portfolios made possible by JLL
The flight to quality is impacting every property type. Supply has not kept up with demand for high-quality space, especially in the office market. The shortage creates challenges and opportunities for every market participant. Whether you’re a tenant, investor or developer, we’ve created a guide to help you navigate today’s market. Fill out the form to get tips to help you stay competitive in the real estate space race.
Whether your business is evaluating what to do with outdated properties or considering new locations for expansion, JLL Consulting Services can create strategies to position your portfolio for a future where quality matters more than ever. We bring you independent, objective and actionable advice informed by our global experience, insights and a bespoke location model. What’s more, we’ll connect you with our colleagues who can help bring the strategies to life.
Ready to take your portfolio and location strategies to new heights? Contact us today.
