Get your business on, because we are talking about Office Investments! Whether you’re passing off yoga pants as business casual or you’re dressing to impress, there are different offices out there to match your style!
Wait, there’s types?
Class A office buildings are like the expensive organic avocados that are ripe when you want them to be. They are the highest quality in their market. They are generally the best looking, well-located, easy access, and are professionally managed. They attract the highest quality tenants and can command the highest rents.
Class B offices are a notch down, like avocados that aren’t too pricey, but it’s hit or miss if they are going to be ripe at the right moment. They may be a little older than Class A buildings, but they still attract good quality tenants and have good management. Class B buildings are well-maintained and are a good target for value-add investors. If they are able to restore & renovate a building in a good location to its true potential, it can reclaim its Class A status.
Class C offices are mushy brown avocados that ruin your guacamole plans. They are generally the least desirable buildings that may be older, in need of extensive work, and located in undesirable areas. They are harder to lease and have the lowest rental rates. Their technology may be outdated and they are usually the target of redevelopment. But never fear, there are people out there that will eat questionable avocados just for the thrill!
Temperature of the Market
Due to general lack of construction in the suburbs, vacancies are likely to show improvement farther out rather than downtown, where development has increased. With suburban companies moving downtown downtown companies downsizing, every office space is feeling the impact. Tenants have some negotiating power again as new space comes on the market and landlords may need to make some concessions to convince tenants to stay. There is optimism for those brown avocados: many value-add investments downtown are paying off as they are being leased and selling at high price points.
So, is there light at the end of the office investing tunnel?
Short answer: Yes! Not-as-short answer:
Increasing demand for dynamic co-working space is driving investors to think outside of the box moving forward. Office buildings need to increase amenities to stay competitive. WeWork and Regus changed the game by offering flexible common office space for startups to collaborate. Offices are maintained, staffed, and available for companies to use on a flexible basis. Amenities include conference rooms, gym space, online support & tools, software, and community events. This is the key to help office investors not only survive, but thrive in the new world of increased tenant expectations. You can be that shiny organic avocado!!
There are several ways to navigate the commercial office market and make a good investment that fulfills your goals. Knowledge is power — we have market data and tools to power your investment strategy. Like Charlie Puth, we are just one call away! Not interested in talking on the phone? Email us here.