In the $90 billion U.S. office construction sector, Class A and Class A+ properties are the darlings of every major metro market. Owners and developers of these amenity-rich, high-performance buildings are competing to lure top-notch companies willing to pay the most lucrative lease rates—and to keep them there long-term.
There’s certainly plenty of money to be made in building and rehabbing Class A office buildings. But what about their less-flashy counterparts, Class B and Class C properties?
A new Urban Land Institute report, researched in partnership with the Rocky Mountain Institute and the Building Owners and Managers Association (BOMA), suggests that there is significant “hidden value” waiting to be unlocked by owners of Class B/C properties—and plenty of work for AEC firms that cater to these segments of the office market.
For myriad reasons, these properties are woefully outdated and in serious need of a tune-up to meet baseline energy efficiency standards. The ULI report found that even the simplest of energy efficiency measures—low- and no-cost tactics such as upgrading general office illumination to LED fixtures, optimizing HVAC schedules and setpoints, performing routine preventative maintenance, and engaging tenants in occupant behavior measures—could net an immediate 15% savings in energy costs.
Larger capital investments—such as improvements to the building envelope and roof system, or installation of high-efficiency building systems, sensors/controls, or solar panels—could slash energy use by 35% or more, with paybacks in the three-year range. “That can reduce a property’s operating expenses by $0.26 to $0.61 per square foot, increase net operating income by 1.9% to 4.3%, and boost property value by approximately $4 to $8 per square foot,” said the authors.
Why haven’t more Class B/C property owners taken steps to improve the energy performance of their buildings? The report pinpoints three primary reasons: limited working capital to pay for project costs, inadequate staff capacity to implement these measures, and a lack of priority versus other business activities.
Furthermore, by successfully instituting a green lease program, owners can recoup a sizable portion of the initial investment, which would further improve the financial outcomes for the property.
If all of this is so elementary, as the report outlines, why haven’t more Class B/C property owners taken steps to improve the energy performance of their buildings? The report pinpoints three primary reasons: limited working capital to pay for project costs, inadequate staff capacity to implement these measures, and a lack of priority versus other business activities.
“Staff working at Class B/C buildings wear multiple hats. Rarely do they have dedicated third-party management or building engineering staff with time to focus on identifying, championing, and implementing energy efficiency efforts,” said the authors.
The report offers a roadmap for getting started.
For a free PDF download of the ULI report, “Unlocking Hidden Value in Class B/C Office Buildings,” visit BDCnetwork.com/ClassBC.
Related Stories
Multifamily Housing | Mar 24, 2023
Average size of new apartments dropped sharply in 2022
The average size of new apartments in 2022 dropped sharply in 2022, as tracked by RentCafe. Across the U.S., the average new apartment size was 887 sf, down 30 sf from 2021, which was the largest year-over-year decrease.
Government Buildings | Mar 24, 2023
19 federal buildings named GSA Design Awards winners
After a six-year hiatus, the U.S. General Services Administration late last year resumed its esteemed GSA Design Awards program. In all, 19 federal building projects nationwide were honored with 2022 GSA Design Awards, eight with Honor Awards and 11 with Citations.
Transportation & Parking Facilities | Mar 23, 2023
Amsterdam debuts underwater bicycle parking facility that can accommodate over 4,000 bikes
In February, Amsterdam saw the opening of a new underwater bicycle parking facility. Located in the heart of the city—next to Amsterdam Central Station and under the river IJ (Amsterdam’s waterfront)—the facility, dubbed IJboulevard, has parking spots for over 4,000 bicycles, freeing up space on the street.
Healthcare Facilities | Mar 22, 2023
New Jersey’s new surgical tower features state’s first intraoperative MRI system
Hackensack (N.J.) University Medical Center recently opened its 530,000-sf Helena Theurer Pavilion, a nine-story surgical and intensive care tower designed by RSC Architects and Page. The county’s first hospital, Hackensack University Medical Center, a 781-bed nonprofit teaching and research hospital, was founded in 1888.
Project + Process Innovation | Mar 22, 2023
Onsite prefabrication for healthcare construction: It's more than a process, it's a partnership
Prefabrication can help project teams navigate an uncertain market. GBBN's Mickey LeRoy, AIA, ACHA, LEED AP, explains the difference between onsite and offsite prefabrication methods for healthcare construction projects.
Women in Design+Construction | Mar 21, 2023
Two leading women in construction events unite in 2023
The new Women in Residential + Commercial Construction Conference (WIR+CC) will take place in Nashville, Tenn., October 25-27, 2023. Combining these two long-standing events aligns with our mission to create an event most impactful for women in the $1.4 trillion U.S. commercial and residential design and construction industry.
Mass Timber | Mar 19, 2023
A 100% mass timber construction project is under way in North Carolina
An office building 100% made from mass timber has started construction within the Live Oak Bank campus in Wilmington, N.C. The 67,000-sf structure, a joint building venture between the GCs Swinerton and Wilmington-headquartered Monteith Construction, is scheduled for completion in early 2024.
Sports and Recreational Facilities | Mar 17, 2023
Aurora, Colo., recreation center features city’s first indoor field house, unobstructed views of the Rocky Mountains
In January, design firm Populous and the City of Aurora, Colo. marked the opening of the Southeast Aurora Recreation Center and Fieldhouse. The 77,000-sf facility draws design inspiration from the nearby Rocky Mountains. With natural Douglas Fir structure and decking, the building aims to mimic the geography of a canyon.
Architects | Mar 16, 2023
HKS launches partner diversity program to create a more diverse workforce and partnership network
Design firm HKS has launched a new partner diversity program that will work to build a more diverse AEC ecosystem. The HKS xBE program will give xBE firms (a term encompassing all disadvantaged businesses) and their members “access to opportunities to build relationships, pursue new work, and bolster innovation within the architecture and design professions,” according to HKS.
Sustainability | Mar 16, 2023
Lack of standards for carbon accounting hamper emissions reduction
A lack of universally accepted standards for collecting, managing, and storing greenhouse gas emissions data (i.e., carbon accounting) is holding back carbon reduction efforts, according to an essay published by the Rocky Mountain Institute.