5G connectivity

Ratings signal to potential tenants that the building will meet their digital needs

Research

Connectivity ratings boost rent by 41% in old stock, Moody’s study finds

Buildings certified for digital connectivity in the US have a 3.8% lower vacancy rate and attract leases that are nine months longer than in comparable buildings, according to research by Moody’s Analytics.

The study, which compared offices with and without WiredScore ratings across the US, sought to quantify the benefit of certification using “rigorous statistical techniques”.

On a per-square-foot basis, Moody’s found that rents in certified buildings are $6.50 higher across the US.

“From a pricing perspective, WiredScore-certified buildings charge higher rents and are able to do so because certification signals to tenants and the market that the property focuses on delivering an exceptional, technologically enabled experience,” the report said.

Researchers considered factors like building age, class and location, but they did not differentiate between different levels of WiredScore ratings. In other words, a ‘Silver’ and ‘Platinum’ building would have been given the same weighting in the analysis.

Case for retrofits

The numbers for Houston suggest that lower spec, potentially less desirable Class B and C offices have the most to gain from certification.

While rent for certified Class A buildings was 16.3% higher than the Class A average, within Class B/C, the rating premium was 40.9% ($30.24 per sq ft vs $21.46 per sq ft in Q3 2022).

The same trend was evident in metro areas across the country, the report said.

The trend suggests that landlords have a strong incentive for undertaking retrofits and ensuring that older buildings are updated with digital connectivity. This also echoes the results of a recent essensys report, which found that tenants’ main priorities are fast and reliable WiFi.

Moody’s said: “Without the most up-to-date advancements, the potential tenant base becomes limited before the process even begins.

“This trend was already gaining momentum even before the pandemic, but with flexible work arrangements now having a greater presence than ever before, it is now crucial to digitally connect with colleagues placed all around the globe.”

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