Battle of the B’s
The “flight to quality” storyline has neatly split the market into 2 main baskets; A and B or simply the best and the rest.
The real story goes, the best buildings met the market, leased up space, and changed the terms on offer. Now they don’t seem to offer as much value as the rest.
The rest are fighting it out for tenants, and we will call this the “Battle of the B’s”. The B’s include:
- B Grade buildings – PCA grading
- Wanna B’s – would like to be B’s
- Should B’s – not really A
- Shouldn’t B’s – good quality buildings hampered by “something”
- RefurB’s – refreshed buildings not as shiny as the rest
- Backfill – vacant space arising from a tenant’s relocation to better value
- Backfill – sublease space which may only be a tiny percentage of the overall market but anywhere between 5-10% of the actual vacancy
This is the largest and most homogenous portion of the market. It is extremely competitive and offers the best value for money. It is also the home to the largest portion of CRE tenants – the value seekers.
This Battle of the B’s is not new. It’s been going on for decades and fluctuates relative to vacancy levels.
So how is it going to pan out? One way of looking at it; no one wishes to be left behind so if you are not the best, you may as well be the best of the rest.
We still think that this B basket is where all the opportunities reside for both landlords and tenants.
The battle continues – B prepared.
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