Much has been talked about a ‘flight to quality’ in the office sector given the structural shift to hybrid working. However, while there is evidence of this in relative rental performance, a look at the yield data suggests that the opposite has been true since the pandemic. Given that future rent growth prospects also swing in favour of prime, this signals to us that current non-prime office pricing is unsustainable and further sharp capital value declines are likely for non-prime offices.
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