For our last comparison, we will take a look at Class A office vs Class B and Class C office. How has size, pricing, and sales volume changed within the past 20 years?
Class A has been the darling of all office space for the past two decades, which makes sense when you think about it. Metro Phoenix is maturing. When a market matures, the quality of the office space rises. Additionally, as the war for talent has increased, users are competing harder than ever for employees. Office space has become a differentiator. (We have addressed this a number of times in previous C2 Voices: Returning to Work, Stick or Carrot, Will Work from Anywhere Work?.) “If employers want their workers to come back to the office, they’ll have to give them a better experience,” (Older Phoenix offices sit empty while new ones are in high demand).
Another huge reason is the size of our market geographically. Users want to be close to their executives and employees. This creates opportunities in multiple submarkets for class A projects that will lease well and stay leased. Over the years, we have seen Phoenix evolve from the go-to city for call centers to now a major contender for regional and even national headquarters. AND headquarter users demand Class A space…. wherever they land in the Valley.
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Interesting Info:
- Sales volume for Class A was $647 million in 2004 and a shockingly low $390 million in 2023. This is one obvious indicator of the depth of our current office woes. We are in a transition for sure.
- The next decade will be all about quality office space. Class B buildings will get refurbished to Class A if they are in great locations. Class A will rule the roost for leasing and sales. Investors will want proven buildings in proven locations.
- We will see Class B and Class C buildings torn down or repurposed.
Conclusion:
Class A is the place to be for the next 10 years.
