3 Tips for Landlords Navigating the Flight to Quality

The age of hybrid work is upon us. While some companies are pushing employees to return to the office this fall, many more see hybrid work as the new normal. Office occupancy, according to the 10-city average calculated by Kastle, is sitting right around 50%, while three-quarters of companies surveyed by CBRE have formalized hybrid work policies.

As companies embrace hybrid work, largely by necessity, many are reducing the size of their office footprint. Economist Stefan Weiss has estimated that hybrid work will reduce office space demand by about 9%. But that doesn’t mean office landlords should panic. History has repeatedly shown that tenants have the tendency to overcorrect, in this case giving back too much space. Although this environment is clearly different,  the pendulum could swing back if more employees start to return to the office full-time. Even if hybrid continues and mid-week is the primary time in the office, space will be needed on those days to accommodate the same magnitude of employees as if it was full-time.  In addition to tenants coming off of short-term extensions due to the last few years of uncertainty , this could create significant pent-up demand for high quality space.   

Additionally, we’re seeing more and more tenants move to high-quality buildings with state-of-the art amenities. If landlords want to draw more people back to the office, they must create a workspace where people really want to be. That means offering perks like outdoor workspaces, curated food offerings, and activities like yoga classes, but more significantly it means prioritizing tenants’ health and well-being from the inside out. 

The tricky part is that quality is a subjective term with a definition that is constantly evolving. To navigate the current flight to quality, landlords need to be prepared and flexible. Here are three tips for building owners feeling overwhelmed by the fluctuating landscape.

1. Do more than check the box.

Recent years have seen an explosion of wellness, environmental, and infrastructure connectivity certifications—from WELL, WiredScore, Fitwel and UL to the more traditional LEED certification. These aren’t just logos on a webpage or brochure; they’re best-in-class certifications that are acknowledged and respected around the world. They offer trusted, third-party evidence—thanks to a rigorous certification process—that building owners have prioritized everything from the air tenants breathe and the water they drink to how they feel in and around the building. 

When building owners invest time and resources to secure these certifications, they send a powerful message that they care about the wellbeing, comfort, connectivity, and productivity of their tenants. The International Well Building Institute’s WELL certification, for instance, is an evidence-based rating for indoor health and safety, focusing on operational policies, maintenance protocols, stakeholder engagement, and emergency plans. The UL Verified Healthy Building Mark, meanwhile, demonstrates a landlord’s commitment to indoor air quality through ventilation, filtration, and hygiene.

But while certifications are important, they should be the starting line—not the finish line. Ideally, these certifications offer a snapshot of philosophies, procedures, and best practices embedded in your building’s overall operations. Emphasize quality in every area: making strategic investments, maintaining your building, offering best-in-class service and experiences to tenants, and ensuring employees remain subject matter experts —especially those on the front lines with your customers. As you pursue certifications, make sure the customer-centric “why” is central to the culture and mission of your organization, as opposed to simply checking the box and moving on.

2. Commit to flexibility.

The current flight to quality comes on the heels of an amenities arms race. Physical lifestyle amenities like food options, gyms, and rooftop terraces undoubtedly play a large role in attracting tenants and bringing employees back. But in the wake of so much uncertainty, building owners need to prioritize flexibility as opposed to new large-scale capital improvements. Your commitment to flexibility should also touch every corner of the business: flexibility in lease structures, flexibility for workers, and flexibility regarding what quality means.

In the past, proximity to mass transit was a leading indicator of quality. It was hard to imagine a high-demand office space existing more than a few blocks from a metro stop. But public transit usage plummeted in the wake of the pandemic. We also saw more young professionals leave larger cities in favor of life in the suburbs. Is proximity to mass transit now less relevant? It would be tempting to think so. But already, migration to cities has picked up again. Committing to flexibility means accommodating such rapidly changing trends. Ideally, landlords should offer proximity to mass transit and convenient parking for those commuting from the suburbs.

Due to liability concerns, many landlords previously shied away from daycare centers. But daycare may become a key amenity as labor participation for parents with young kids remains high. The reality is simple: what people value is in the midst of changing. In the absence of a crystal ball, landlords must wait and see how this transitory period shakes out. Flexibility—the good F word—is key.

3. Prepare to pivot.

Building owners also need to prepare themselves for flexibility on a larger scale. As tenants flee to quality, some office spaces will get left behind. Instead of wallowing over a functionally obsolete asset, be prepared to pivot. Last year, we saw a record number of apartment conversions. If hybrid work is indeed here to stay, building residential units with more space to work from home may be smarter than adding amenities to office space that simply can’t compete. Be open to the fact that your assets may be more valuable as multifamily or life sciences. In D.C., about 4 million square feet of office-to-residential conversations are underway. Pivoting may seem scary, but it’s likely to pay off in the long run.

The bottom line is that landlords need to strike the right balance of investing in their existing office space—through certifications, amenities, and best practices—while also waiting out some of the current uncertainty. As things stand now, flexibility is the name of the game. Building owners who can offer quality while remaining nimble will be the best poised for success going forward.