Size/location of one's office

is a way to show one's standing among his peers.  Of course, it depends on the company's culture but true in a lot of places.  In other words, all of your levels may be 4, but it only means none of you has reached level 5.  If decimals are allowed, your actual level is 4.2, and your peers are at 4.5, 4.6, ...  At least that's how your boss thinks. If you feel his perception is not fair, there is nothing wrong with discussing the issue with your boss.