Kelsi Maree Borland has an excellent article on GlobeSt.com. Her article titled – Rethink Your Definition of Class-A A focus on amenities, outdoor spaces and food-and-beverage services has changed the definition of class-A real estate, hits a number of the points we have been stressing for those real estate investors looking to make value-add plays on older office or in our opinion potentially even retail buildings.
Though the article is behind a pay-wall I thought she lays out the changed concept of what constitutes Class A office space by writing:
Once simple defined as a top-end building—whether office or multifamily—class-A now requires a lot more than just quality to be competitive. New class-A space in Downtown Los Angeles comes with a full amenity package, outdoor spaces and food-and-beverage services.
We see this trend as growing outside downtown areas and continuing into the suburban office building sub-markets in Philadelphia. People’s desire for good spaces, amenities and wellness or healthy living options is only going to continue to grow.
A recent article in AZ Big Media, Offices look for competitive edge to attract and retain tenants also highlights the growing push towards the use of amenities and how they can differentiate one’s office building. Though the article highlights the Arizona market, I found two quotes in the article especially telling.
“The competitive environment to recruit and retain employees is pushing the facility amenities,” said Bryan Taute, executive vice president at CBRE. “The buildings with the best amenities are typically leasing faster and getting higher rents.”
“The buzz around amenities outweighs the number of buildings that actually have amenities to offer,” added Chris Walker, managing director at Cushman & Wakefield in Phoenix. “Those that provide them and provide them in a well thought out, impactful manner, will likely see increased occupancy and potentially will be able to hold rental rates better than the competition.”
How office developers and building owners decide what amenities to incorporate in their facilities depends on the market and what type of tenant they are trying to appeal to.