How the SBA's new $10M limit affects land and development

June, 2026

As of mid-2025, the best office buildings in the U.S. carry a vacancy rate of 14.5%. The rest of the market sits almost 5 points higher, and the gap keeps widening.¹ That spread is the whole story.

A market splitting in two

This is what the industry calls flight to quality, and it has stopped being a soft trend. Tenants are leaving older, commodity space and consolidating into newer buildings in better locations, even when those buildings cost more.

The same split shows up in occupancy. Older buildings have shed more than 400 million square feet since 2020, while buildings built in the past decade gained nearly 150 million.²

A market-wide vacancy average blends both tiers together, so it misses what’s actually happening underneath. For a decision about land, the tier is what counts.

What most people miss

Most coverage treats flight to quality as an office leasing story. If you own or develop land, the more useful question is what it tells you to build.

Demand is concentrating. The capital, the tenants, and the long-term value are flowing toward a narrower set of well-positioned, high-quality product. Same economy, opposite outcomes, decided almost entirely by the quality of the asset.

That concentration changes how you should read a piece of land. A site that pencils for a mediocre build in a soft location is a different asset than a site that supports a quality project in a path-of-growth corridor. The dirt might look similar. The development potential is not.

What smart developers and landowners do about it

The move is to underwrite for the quality tier you can actually deliver, not the market average.

Start with honest highest and best use. Does the location, zoning, and infrastructure support a project that competes at the top of its category, or are you building something the market is already walking away from? If the answer is the latter, the right play may be repositioning the entitlements, holding for a stronger use, or selling to a developer who can.

Site readiness matters more in this climate, not less. Entitlements, utilities, and access are what let a quality project get built on time and on budget while competitors stall. In a bifurcated market, being able to deliver the right product faster is the advantage.

The takeaway

Flight to quality is a durable repricing of what the market actually wants, and it rewards land that can become the right project in the right place. The owners who do well are the ones who plan for that early, well before they break ground.

PLD helps landowners and developers understand what their land can truly become, from highest and best use through entitlements and feasibility, so the project that gets built is the one the market is competing for.