Beauty is in the eye of the beholder. If an office is providing the lessee what he or she wants, it may be rated as “the best” no matter what its condition. Let me share a brief story that illustrates that point.

This is fascinating. Those paying the lowest rent (blue) and highest rents (yellow) feel they are getting what they pay for. 80% of the low rent group and 82% of the high rent group think the quality of the offices are the best, or nearly the best. But on 17% of the medium rent group feel that way.

More tenants in the $6 to $9 rated their property a number one, the best, than did tenants in the $12 to $16 class, 60% vs. 40% although it’s likely that the building in that group were better maintained. How can that be?

Results from 2011 Office Survey. Those paying the highest rents feel they are getting what they pay for.

The vast majority

At the beginning of my real estate career, I had the opportunity to lease what was then the best office building in town. An out of town firm had purchased a well maintained older building and had spent a ton of money renovating the public areas and had a liberal fit out budget for new tenants. Given the situation I felt that everyone was a prospect. I began by contacting tenants in the most dilapidated building assuming they would jump at the chance for something better. What I found however, was that the vast majority were perfectly happy.

The reasons fell into one of several categories

  • They were at the beginning of their career and could not spend a lot for office space
  • They were at the end of their career and did not need to impress anyone
  • The quality of their space was simply not important to them
  • Clients never came to their office and its appearance was secondary

We eventually filled the building but it was not an easy sell.

To being with, anyone paying $6 to $9 per foot is receiving a gift from the landlord, and that alone merits a five star rating.

But more important, people are happiest when they feel they are getting what they paid for. Tenants in low rent building are there because they want to be there and are pleased with the situation. People in high rent building feel the same way. However, the group in the middle may really want better, or lesser space, but are unwilling to search for it, or pay for it or both. Therefore they are dissatisfied with the quality of the space and/or the rent they are paying.

The above was a result of the 2011 Summary of Offices, which Management Enterprises, Inc. conducts on an annual basis.

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