What is an Office Grade A, B, or C? What criteria does the Savills office evaluation system have in 2023?

 

Savills’ office classification evaluation system is one of the most popular standards in Vietnam. In early 2023, Savills updated its office evaluation system with 19 standards and a new classification as Grade A offices for rent outside the city center. In this article, let’s learn about the changes in Savills’ office evaluation system update in 2023.

Savills Office Evaluation System

What is an office rating system?

In the industry of office real estate, office markets are often classified into three separate classes: class A, B and C offices for rent. The office evaluation system assigns points and grades based on criteria. Even factors such as location, utility system, layout, management, parking,… factors such as the building’s impact on the environment or high-tech features in the building are also increasingly considered and rated higher in the scoring system.

The office evaluation standards system will classify office rent grades A, B, and C according to specific criteria

The office evaluation system creates standardization in the industry, supports tenants in making leasing decisions easier, and helps building owners or managers implement construction and management processes according to standards, allowing consultants or agencies to learn and monitor the market accurately. Standardization is also the foundation for transparency and fair competition in the real estate market, which is important in any market.

Why does Savills have its office evaluation system?

Savills has been researching the Vietnamese real estate market since 2004. As an experienced consulting company, although there was no previous official rating system, experts at Savills have created a guide. Comprehensive to evaluate offices. Over the past two decades, the office market in Ho Chi Minh City has grown strongly at a rate of 12% per year, from 300,000 m2 of leased area with 18 active projects in 2004 to 2.6 million m2 of leased area with 379 projects operating in the first quarter of 2023.

In Hanoi, the increase rate is 13% per year, from 282,000 m2 of rented area and 50 operating projects in 2006 to 2.19 million m2 of rented area with 192 operating projects in Q1 2023.

Update Savills’ office evaluation system in 2023

Why does Savills need to update the rating system?

The growth of the office market in Vietnam reflects the country’s rapid economic development. Thanks to better urban planning, improved infrastructure, and more effective traffic connections, many offices outside the central area have now been invested in, built, and developed in accordance with the law, modern, more advanced standards.

Offices will change based on the development of the economy and technology, so it is necessary to update the evaluation system to classify offices most accurately

Therefore, Savills’ office evaluation system needs to be updated to properly evaluate current market conditions. At the beginning of 2023, Savills updated its rating system to reflect the market and current projects. This update ensures transparency and establishes a stronger foundation for the future development of the office rental market.

Besides, this update also shows that there are changes taking place in the office market. Offices are no longer just seen as “space as a commodity”, but instead as “space as a service”. Therefore, the updated rating system includes several RISE principles. RISE is a customer-centric model that creates a bridge between customer expectations and experience. These metrics specifically consider factors such as experience, interaction, and environment.

Savills’ newly updated rating system

Grade A, B, and C rental buildings will be determined based on a comparison with 19 criteria related to building quality and user experience, including factors both inside and outside the building such as high ceilings, ESG, public transportation, surrounding amenities, etc.

Ordinal Number	Criteria
1	Building Age
2	Location
3	Architecture and landscaping
4	ESG
5	Scale
6	Typical floor plates
7	Raised floor
8	Columns
9	Floor-to-ceiling height
10	Backup power supply
11	Lifts
12	Parking
13	Public area
14	Ablutions
15	Air conditioning
16	Management services
17	Technology
18	Internal facilities
19	Safety and security

Savills new office evaluation and classification criteria table in 2023

A high ranking does not mean an office has a high rent. For example, Grade A offices in urban fringe areas such as OneHub Saigon is designed and built according to Grade A standards but still have a better rent than many buildings of the same class or even Grade B offices in central areas. Projects like OneHub Saigon will be classified into a new category of “Grade A in Sub-Urban” office space for rent.

Column-free space is a plus point when classifying offices

Explaining Savills’ new rating system

Savills’ newly updated evaluation system includes 19 criteria considered most important for office buildings. The rating system looks at each criterion one by one, and buildings can receive a score from 1 to 100.

Grade A office (85 to 100 points)

Considered a property in a highly commercial area and close to public transportation. These buildings have unique architecture and landscapes, meet many modern standards, commit to environmental, social, and corporate governance (ESG), and apply technology effectively. Grade A Office buildings for rent have good safety and security systems and are managed by reputable companies.

Grade A office rental requires many factors to enhance the experience of building users

Grade A office in Sub-urban (85 to 100 points)

This is a new classification, updated in early 2023. Grade A buildings in Sub-urban are classified as a well-developed project in a planned urban area with a commercial service system, commerce and good traffic connectivity. Other features in the building must be similar to regular Grade A standards.

A grade-A-quality office in Sub-urban area – OneHub Saigon

Grade B office (from 65 to 84 points)

Grade B office buildings must be connected to other commercial projects and public transportation. Other standards, such as ESG, services, elevators, building technology, etc., are average. Grade B buildings still provide good safety and security and are managed by experienced units.

Grade C office (from 35 to 64)

This is the lowest class; class C buildings have conventional architecture, small floor areas, and basic entrances. Buildings must have at least 1000 m2 of usable area, interior specifications, optional interior amenities, a streamlined management team, etc.

How are the old and newly updated evaluation standards systems different?

The updated rating system prioritizes criteria such as location, ESG, building specifications, and management services.

• Location: Determined by the density of business services around the building and distance to public transportation (metro, bus station, etc.) instead of requiring geographic location as before.
• ESG: Although awareness of ESG in the region and in Vietnam is still low, this will change rapidly as ESG becomes a fundamental concept for businesses. Project investors can improve ESG criteria by following the standards of global rating organizations on achieving green certification, using environmentally friendly materials, and implementing strict governance. closely with social commitments.
• Building specifications: Focus on tenant experience with features such as interior quality, elevator, air conditioning system, parking, restrooms, safety and security, building amenities, and technology. Good technology with smart, automated features, as well as good connectivity, will be important for buildings to improve operational performance, tenant experience, and competitiveness.
• Management services: The operational team applies specialized management programs such as RISE.

Changes in assessment methods

Because there are no professional or national standards in Vietnam, Savills used criteria from international sources to build its office evaluation system. International standards from Hong Kong, Singapore, and Canada are most suitable for market developments and trends in Vietnam. Although international standards were used, local characteristics were also considered to ensure the rating system could accurately determine the class of office buildings in the Vietnamese market.

>>> See more: Understanding LEED Certification for Office Buildings

Reclassification based on average standards and building performance

The updated rating system has the potential to change the class structure, which will affect performance by class. For example, building renovations to new standards and building upgrades mean there are more Grade A and Grade A office buildings for rent outside the center. Conversely, outdated projects that were highly rated in the past may be downgraded.

Air quality in the building, common spaces, trees, etc. are factors that old office buildings can improve and upgrade

However, the downgrade is not necessarily permanent. Building owners can upgrade and improve based on changeable standards, such as building additional common areas or upgrading building amenities such as air conditioning systems, elevators, parking lots, etc. Building owners can also deploy additional technologies and management programs to improve the building’s position on the ranking standards table.

>>> See more: Updating Current Trends in Large Floor Plate Office Building

Conclusion

Savills’ office rating system creates transparency and clarity in the commercial real estate market. While standardization is important, rating systems must be periodically updated to reflect market realities. Following an office rating system can help ensure the long-term success of the commercial real estate market. Classifying office rental standards into grades A, B, and C, as well as updating new rankings such as grade A offices in Sub-urban, is necessary for the continuous development trend of the office market in Vietnam.