Flight to Quality: Why a New Tier of Class A Space is Emerging
In today’s dynamic commercial real estate (CRE) market, one theme is cutting through the noise: the flight to quality.Across Arizona, business leaders and tenants are demonstrating a clear preference for newer, better-located, and amenity-rich assets—especially in the face of economic uncertainty and shifting workplace strategies. Reiterate the return to work. A 2024 KPMG survey of 1,300 U.S. CEOs found that 79% of CEO’s expect employees to be in the office full-time within three years. As return-to-office mandates become more popular, premium Class A buildings are leased in an effort to soften the policy adoption and cater to employee comfort.
What “Flight to Quality” Means
The phrase “flight to quality” describes the movement of capital and tenants away from older, less efficient properties into Class A buildings and prime locations. It is less about chasing prestige and more about minimizing risk and maximizing long-term value. For businesses, this may mean higher upfront rent but lower operating costs,
stronger employee attraction, and more resilient occupancy.
Why Arizona Is at the Center of the Trend
Arizona’s commercial real estate market is uniquely positioned to illustrate this behavior. Phoenix, Tempe, Scottsdale, and Chandler are home to new clusters of Class A office space, fueled by overwhelming demand by tenants for this class of space. As companies from around the world flock to Arizona, we are witnessing in real time a shortage of Class A signature properties. What would have been unheard of even 12 months ago, developers are now making plans to develop new Class A properties on a speculative basis as a result of the shortfall.
In the office sector, while older Class B and C properties continue to struggle with vacancy, Class A towers in Phoenix’s core submarkets remain highly competitive. Many Class B and C properties are being evaluated for the viability of major overhauls to accommodate this “flight to quality” trend. Tenants are demanding more from each square foot—whether through sustainability features, integrated technology, or collaborative design.
Industrial real estate tells a similar story. Companies reshoring production or expanding distribution networks are seeking state-of-the-art facilities with advanced power, cooling, and logistics capabilities. Outdated warehouses cannot accommodate these requirements, leading occupiers to prioritize premium assets despite higher costs.
The Bottom Line
The Arizona CRE landscape is no longer about simply “location, location, location.” The new paradigm is “quality plus location.” In uncertain times, the safest move is often the smartest one—a flight to quality. And as tenants pursue this shift, they should also negotiate lease clauses that provide flexibility—such as options to expand, contract, or share in rising costs—so their real estate can adapt as business needs change.
Looking for help navigating this trend or negotiating your lease agreement? Keyser is here for you. Call us at 602.9.KEYSER or email info@keyser.com.
FAQs on the Flight to Quality in Arizona CRE
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What does “flight to quality” mean in commercial real estate?
It’s the shift of tenants and investors toward newer, well-located, and amenity-rich Class A properties. The move prioritizes long-term value, employee attraction, and operational efficiency—even if it means higher upfront costs. -
Why is Arizona at the forefront of the flight to quality trend?
Arizona’s business hubs—Phoenix, Tempe, Scottsdale, and Chandler—are attracting global companies seeking premium office space. Demand has outpaced supply, prompting developers to plan speculative Class A projects to meet tenant needs. -
How does the return-to-office movement impact demand for Class A buildings?
With 79% of U.S. CEOs expecting full-time office attendance within three years, companies are leasing premium Class A properties to ease policy adoption. These buildings offer the comfort, amenities, and flexibility that help employees embrace the return to office.
