CoStar Portfolio Strategy and WiredScore recently partnered to conduct a CoStar Portfolio Strategy study of the impact of Wired Certification on office buildings. Wired Certification is the first and only rating system for commercial real estate buildings that enables landlords and developers to understand, improve and promote their property’s digital infrastructure.
The buildings examined were located in Manhattan, where WiredScore was launched in 2013, and more than 350 office buildings had achieved Wired Certification.
The study yielded three takeaways that building owners should not only find interesting but may make them consider having their buildings get Wired Certified if they are not already.
- Buildings with Wired Certification receive higher rates than peer buildings.
Internet connectivity is one of the biggest factors besides location that can help determine a building’s rental value. When a tenant is willing to pay more in rent, they expect top-notch digital infrastructure. The study revealed as a building’s Wired Certification level rose, so did its rents—by an average of 6.9% between each level ranging from Certified (the most basic) to Platinum (the highest). According to the recent study conducted by the CoStar Portfolio Strategy team — the data/analytics leader of the $17 trillion commercial real estate industry — Wired Certified buildings in Manhattan, those with the fastest and most reliable internet connection, receive higher rent than peer buildings by up to $7.50/SF and help attract top talent.
- Creative tenants locate in connected buildings.
Tenants in the technology, advertising, media and information (TAMI) fields prioritize quality office space in the best locations in order to compete for creative talent. TAMI tenants occupy up to 13.3% of the top rated, Wired Certified Platinum buildings in New York. Meanwhile, these same tenants only take up 6.9% of unrated buildings and an average of 8.4% of buildings that are rated Wired Certified, Silver and Gold.
- Class B rental rates get the most lift rom Wired Certification.
All building owners, but especially those with Class B buildings should consider improving Internet connectivity in order to raise rental revenue, according to the study. Wired Certified Class B properties, which are awarded 3 out of 5 possible stars on CoStar’s Building Rating System, generated up to $7.50 per square foot in additional rent compared to non-Wired Certified properties, controlling for proximity to the subway and building rating.
“The average tenant tours at least thirty properties when looking for a new office space so landlords are always looking for a competitive advantage that sets their building apart,” said Arie Barendrecht CEO and Founder of WiredScore. “When you consider the needs of today’s tenants, properties that have invested in a robust digital infrastructure are going to appeal to organizations across all sectors and the assurance that you are moving into an office with reliable, resilient connectivity adds significantly more value to a prospective tenant than other amenities.”
“Internet connectivity is the foundation of the modern economy, making possible the business tools we take for granted today like video conferencing and cloud computing, and enabling the technology trends of the future like smart cities and the internet of things,” said Shaw Lupton, a senior managing consultant with CoStar Portfolio Strategy. “It makes sense to me that building owners should take internet connectivity seriously. As an example, our study found that Wired Certified buildings had a higher concentration of tenants in the technology, advertising, marketing, and information (TAMI) space, so for owners who want to attract creative companies to their buildings, looking at internet connectivity is a good place to start.”