Manhattan Office Rents Increase With Internet Certification
A CoStar Manhattan office report concludes rents rise 6.9% with each WiredScore certification level.
Betsy Kim|May 07, 2018 at 04:00 AM|Originally published on
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WiredScore, a New York-based company, provides Wired Certification. This rates building internet connectivity at four levels: platinum, gold, silver and certified. CoStar, the CRE information and analytics company, added this feature to its buildings’ profile pages.
Having a trusted third party visit and audit a building’s infrastructure provides critical information about internet capabilities, before a tenant signs a lease, says the founder and CEO of WiredScore, Arie Barendrecht. He emphasizes even minor internet outages substantially cost businesses real dollars.
“If you are a direct to consumer e-commerce company and suddenly you can’t transact or your customer service team can’t connect with the unhappy customer, then these costs quickly get into the tens of millions of dollars,” says Barendrecht in a GlobeSt.com interview.
When the internet goes down, companies suffer from loss of employee productivity. “People do not work. Even if you could have worked until the internet comes back, it tends to be a paralyzing event,” he adds.
Considering the internet’s importance, a recent CoStar report analyzed data in Manhattan where over 350 office buildings have Wired Certification. It found Wired Certified buildings received higher rent than peer buildings.
“When tenants pay more for their office space, they expect better internet connections,” Shaw Lupton, senior managing consultant at CoStar Portfolio Strategy, tells GlobeSt.com. In looking at WiredScore rated buildings, on average there was a 6.9% increase in rental properties, between each of the four rating levels.
The report found Class B buildings benefitted the most from certification. They commanded rents up to $7.50 more per square foot compared to non-Wired Certified structures, also accounting for distances to subways. “Class B building internet connections are much, much less uniform than internet connections in Class A buildings,” explains Lupton. “For Class B buildings, the wired certification sends a much needed signal to the marketplace about the quality of the connection in that building.”
TAMI (technology, advertising, media and information) tenants are attracted to buildings with strong digital infrastructures. This sector leased 13.3% of the platinum rating buildings compared to 6.9% of unrated buildings. TAMI tenants took up an average of 8.4% of the buildings with the certified, silver and gold level designations.
“TAMI companies are leading the charge of making real estate decisions based on talent attraction and retention. This responsibility extends to the landlord,” says Barendrecht. He cited a study by the software company Adobe, in which employees reported feeling twice as motivated in high tech environments compared to employees who believed they worked in an office that was technologically behind the curve.
“If a place has bad internet, the employees will feel frustrated and unproductive,” says Barendrecht. This affects not only recruiting but also retention.
Thus far, nationwide WiredScore is the only company providing this certification service. Barendrecht says similar to LEED or Energy Star certifications, the price is determined per square foot. He notes the average cost is about $10,000 for a two-year certification.
The initial assessment for certification considers ease of installing the internet, access to multiple providers, and the likelihood of high quality internet service without disruption. The certification expires because things can happen that interfere with connectivity. For example, a tenant could move in and improperly install internet services blocking the ability for others to access it. The landlord remains responsible for ensuring the infrastructure is maintained to support the digital services.
Plus, technology and expectations continue to evolve. Who remembers dial-up internet connected to landline telephones? At one time that was the state-of-the-art technology.
Expectations for better speed, better service and fewer outages will continue to grow. Wired Certified at the basic level may not qualify for certification in two years. Thus, the company will launch version two and version three of its ratings, staying on top of current technology. “So, the Wired Certified logo at the building store or on the window will tell people it is up-to-date,” says Barendrecht. “This is currently cutting edge, not cutting edge five years ago.”
Betsy Kim is the bureau chief, East Coast, and New York City reporter for Real Estate Forum and GlobeSt.com. As a lawyer and journalist, Betsy has worked as the director of editorial and content for LexisNexis Lawyers.com, a TV/multi-media journalist for NBC and CBS affiliated TV stations in the Midwest, and an associate producer at Court TV.
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