Can you build a new Class “B” building?

There is always controversy in local markets about how office properties are judged. Which ones are A, A-, B, etc. Everyone has their own opinion and there is certainly movement between the classes depending on two primary factors – the basic construction and layout of the property and how it is maintained by the owners.

I’ll make the argument that any new office construction automatically qualifies as an A property simpy due to it being new – new systems and new construction materials.

So what happens to the existing stock of “B” buildings? It can drop when properties slip to Class C due to neglect and lack of maintenance/improvements and/or if these properties are converted to alternatives uses (housing, hospitality). It can increase by Class A properties slipping to Class B for the same reasons listed above.

I think it is safe to say that the overall inventory of Class B office properties is stagnant at best and dropping, albeit slowly. Now consider if demand for these properties remains constant or grows due to their rent discrepancy from Class A properties following the needs of small to mid-size tenants. Basic economics shows increasing demand and a stable inventory of space will move pricing higher. Now image if you can turn these Class “B” buildings into high performance,sustainable properties that offer technology solutions that increase its operating abilities, provide tenants with enhanced amenities and services, reduce costs, and further integrate the real estate into a tenant’s business?

Can we change the nature of what a landlord’s relationship is with their tenants? Can we clearly differentiate properties and compete based on the strength of our product and the services we provide along side our properties? Can we improve tenant retention, beat market occupancies, push rents?

Stay tuned.​

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