🔍 Flight to Quality Defines CRE’s Next Phase

Top-Tier Assets Outperform as Older Buildings Sell at Discounts

Author

Anne Morgan
August 27, 2025

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Hello, Commercial Real Estate Pros! 🏢

Today, we look at how CRE is pushing toward recovery as investors and tenants shift toward high-quality assets in prime markets. New construction is slowing, but demand for top-tier buildings is creating a clear divide between winners and distressed properties.

📰 Upcoming in this issue

  • 📈 CRE Recovery Takes Hold, Flight to Quality Intensifies

  • 🏢 Corporate Real Estate Is The Hidden Lever In M&A Integration

  • 🏥 Medical Office Buildings Are CRE’s Steady Bet

📈 CRE Recovery Takes Hold, Flight to Quality Intensifies

Integra Realty Resources’ midyear report shows more markets in recovery than recession. Top-tier assets win outsized returns, older buildings trade at steep discounts.

Key Takeaways:

  • 📊 Flight To Quality Deepens: Capital and tenants prioritize high-performing assets, widening the gap between prime properties and commodity space.

  • 🏗️ New Construction Slows: High rates, slower rent growth, uncertainty, and rising costs hinder new projects, stabilizing occupancy and rents across many markets.

  • 🏢 Office Stabilizes Selectively: Vacancies stay elevated in urban cores like San Francisco and Chicago, while Sun Belt metros such as Miami and Boise show stabilization.

  • 🏭 Industrial Reverts Toward Mean: Speculative deliveries lift vacancy in DFW, Indianapolis, and Philadelphia, but tight infill markets like San Jose and Richmond stay resilient.

🏢 Corporate Real Estate Is The Hidden Lever In M&A Integration

Many integrations stall because offices, leases, and facilities get addressed too late. This piece shows how a CRE strategy accelerates synergy capture.

Key Takeaways:

  • 🧭 Start During Diligence: Map leases, obligations, and occupancy costs early, so integration plans align with synergy targets and Day 1 decisions land faster.

  • 👥 Design For Talent And Customers: Location and workplace choices protect key teams, maintain service coverage, and reduce disruption for employees and clients.

  • 🗺️ Rationalize The Footprint: Use data on utilization, commute patterns, and demand to consolidate sites, sublease excess space, and renegotiate terms.

  • 📊 Governance And Speed: A joint CRE, finance, and HR playbook sets approvals, metrics, and timelines, enabling fast, coordinated moves without compliance risks.

🏥 Medical Office Buildings Are CRE’s Steady Bet

Average occupancy reaches 93.5% across the top 125 markets, with 42 at 95% or higher. With new supply near 1% of inventory, demand keeps outpacing supply.

Key Takeaways:

  • 📊 Occupancy Near Highs: Average occupancy hits 93.5%, 42 of 125 markets at 95% or higher, rents in those markets rise above 2% annually.

  • 🏥 Sticky Tenants, Long Leases: Healthcare buildouts are costly, tenants sign seven to 10 year terms, lowering turnover and stabilizing income.

  • 🏗️ Supply Constrained: New development is roughly 1% of inventory, higher costs and financing hurdles keep supply tight, bolstering existing asset performance.

  • 📍 Where It Outperforms: On-campus Class A trades competitively, off-campus and secondary assets reprice, best results near major health systems and suburban corridors.

Why It Matters

For CRE leaders, focusing on quality and resilience is key. The assets that meet these standards are attracting capital and positioning owners to benefit most from the recovery.

Anne Morgan
Editor-in-Chief
Commercial Real Estate Weekly

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