One of the biggest themes we’ve been hearing in the office market over the past year is that there’s a flight-to-quality happening. Office tenants in the market for space are choosing newer, Class A properties with top-of-the-line amenities instead of Class B or Class C space. While it may not be the case in every market, there is a lot of truth to this in many markets, leading us to wonder which Class A fundamentals are that much different than Class B and Class C buildings. To find out, we looked at current figures on effective rents and average building age for Class A and Class B/C office properties in five major markets around the U.S.
CityClass A average 2023 effective rentsClass B/C average 2023 effective rentsClass A 2023 average lease transaction sizeClass B/C 2023 average lease transaction sizeAverage Class A building ageAverage Class B/C building ageNew York City75.6550.5328,1809,14019681927San Francisco67.2645.912,6206,49019801928Bay Area52.3441.6515,0604,02019961969Boston56.3237.5513,6408,87019851951Chicago22.1421.614,4005,00019911967Data courtesy of CompStak, 2023
Of the five areas measured: New York City, San Francisco, the Bay Area (which excludes San Francisco but includes Marin County, San Jose, Napa, San Mateo, etc.) Boston, and Chicago, Class A 2023 average effective rents were higher than Class B/C in all cases. But the gap between the rent prices varies between markets. The highest difference seen is in New York, where average Class A rents are $75.65 and Class B/C is $50.53. Similarly larger gaps can be seen in San Francisco and Boston. The Bay Area had a smaller difference, with an $11 difference between
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