In most large office markets, a tenant has a distinct choice: to house their business in a modern, Class A office building featuring dramatic common areas and amenities or to opt for an older building for the sake of lower rent.
Historically, this was essentially a function of the tenant’s brand (translate: image), the needs of its hired talent, and whether the business was public facing; that is, visited often by their clients who might judge the business by the environment they choose. About ten years ago, tenants started to focus on sustainability and their building’s carbon footprint. A LEED (Leadership in Energy and Environmental Design) designation, whether it was silver, gold or platinum was a sought-after distinction.
As a result, since 2010, demand for four- and five-star offices has grown at four times the rate of that for three-star properties and 19 times the rate of that for one- and two-star offices, according to the commercial real estate data gatherer CoStar. Newer buildings, which tend to have more natural light, modern air conditioning and heating systems that are more capable of removing pathogens from the air, more amenities, and more outdoor space, generally better facilitate a focus on health and wellness; indeed, because of newly heightened fears over the spread of communicable diseases, health and wellness is likely to be as important this decade as sustainability was last decade.
To this end, the International WELL Building Institute has launched a new standard to rate how well a building protects its occupants from the transmission of the novel coronavirus. I can imagine many tenants insisting on this certification before signing a lease.
Going upscale or value used to be a matter of style and economics. For some companies it may soon become a matter of life or death.