So you need a new office...

It’s a good time to be looking for office space.  It’s a good time to be looking for any type of space if you have decent financials, but office space in particular. 

West Knoxville has been slightly over-built in the past few years.  The space is slowly getting leased, especially in the last quarter, but still plenty of inventory remains.

Types of Office Space

There are three basic types of office space; Class-A, Class-B, and Flex Space.  Some markets have Class-C space but not many people in Knoxville classify buildings that way.   Office buildings are classified according to a combination of location and physical characteristics. Class B and Class C buildings are always defined in reference to the qualities of Class A buildings. There is no formula by which buildings can be placed into classes; judgment is always involved.  A building in downtown Knoxville that might be considered Class A would be a Class B building in Nashville or Atlanta. Also fair number of the Class C office spaces in the inventory are not truly office buildings but rather walk-up office spaces above retail or service businesses.

Century Park I
Class-A

Class A Office Space describes the highest quality office space locally available. The architecture of Class A office structures usually prioritizes design and visual appeal over cost, (and sometimes over practicality).  In most areas, Class A office space is built in multi-story (usually 2 floors or more), multi-tenant buildings using structural steel and composite concrete construction. 

The Urban Land Institute says the following about these classifications in its Office Development Handbook: "Class A space can be characterized as buildings that have excellent location and access, attract high quality tenants, and are managed professionally. Building materials are high quality and rents are competitive with other new buildings. Class B buildings have good locations, management, and construction, and tenant standards are high. Buildings should have very little functional obsolescence and deterioration." 

Class A buildings are typically very functional.  They provide a strong parking ratio, lots of natural light on the interior of the building and are more energy efficient than their predecessors.

Good examples of Class-A space are the new developments at Century Park at Pellissippi, Lakeside Center off of Northshore and Brookview Town Center off of the Papermill exit.  Lease rates for Class-A space will vary from $17.50psf to $24.00psf in Knoxville.  Most all Class-A multi-tenant buildings will be full service or modified full service with the tenant paying for utilities. 

Corporate Square/Cedar Bluff
Class-B 

Class B space can be found in a variety of areas around Knoxville.  Cedar Bluff has a plethora of Class B developments like Corporate Square and Executive Plaza.  Much of downtown would be considered Class-B space, with the exception of about five buildings.  Typically, any building over 20 years old would be considered Class-B.  There is NOTHING wrong with being in Class-B space.  They are very practical and more economically viable for many businesses.  In fact, most Class-B buildings were once Class-A buildings that time has caught up with. 

Class B space is ideal if you own a business that doesn’t require flash to show off to your clients and customers.  The only real difference in Class A and most of Class B is age and management.  They were designed and built in a different time. Instead of floor to ceiling windows you might get smaller four foot windows.  The HVAC units may be dated, or even residential units, that are not as efficient.  All that being said, if a building has the proper management over the years it’s Class-A status can be extended beyond 20 years.  

Lease rates for Class-B space start at about $12.00psf to $15.00psf in Knoxville.  The levels of service provided by the landlord can also vary from building to building and submarket to submarket.  

Flex space can also be considered office/warehouse.  The office-to-warehouse can be 10% office - 90% warehouse; 90% office – 10% warehouse; or anywhere in between.  It just depends on what you need. Buildings in the Baum Drive area or near Mabry Hood & Kingston Pike would also be called classified as flex space. 

Center Court at Lonas
Class-A

There is plenty of space to be found in Knoxville. A 2007 report from the Metropolitan Planning Commission (MPC) shows that Knoxville and Knox County have a total of nearly 19 million rentable square feet of office space, including 5 million feet downtown and 4.5 million in the Pellissippi Parkway submarket.  Those numbers have increased since additional buildings were completed in the Papermill/Weisgarber area and Pellissippi corridor.  

Your office needs to be in the location and environment that suits its business plan.  

If you often need to impress clients and customers in your office during sales meetings Class A could be the way to go.  In fact, Class A building can be considered a monument and a testament to the success and power of its tenants.  That might be why Century Park, with four buildings all under five years old, has seven Fortune 500 companies as tenants.

If you rarely have customers in your office, Class B can be a viable option.  No reason to pay for flash if you don’t need it (unless you really want it).

As always, Cushman & Wakefield | Cornerstone CRES can help you find the space that best suits your needs.  You can reach us at 865-617-2989 or jcazana@cornerstonecres.com.  Check out our available properties at www.cornerstonecres.com.