Understanding A, B, and C Classes of Office Buildings
Here's how to determine which class is right for you.
Posted: December 14, 2020 by Anna Jotham
Office buildings are as varied and diverse as the people who work within them. To help those who might live, work, manage or invest in a building understand how it compares to others, the industry uses a rating system. The system includes three classes: A, B, and C, and it takes into consideration the features, age, systems, maintenance and amenities in a building. After all, not every office building has a fitness center, and not all depend primarily on fluorescent lighting. In fact, buildings can range from a standard office space with no amenities to a posh high-rise with cafes, onsite dry cleaning and high-end finishes.
Understanding the office building classes and what they mean.
Knowing how your commercial building — or the one you're planning to buy — compares to others is essential to understanding your office building's class. And knowing the class of a building is essential to capturing the appropriate potential tenants. It's important to note that, to some extent, buildings are rated subjectively. More, it's important to note that from market to market, buildings in the same classes can look quite different; a Chicago office building is likely to rate differently than one in La Crosse, for example.
Here's what those office building classes look like.
Class A office buildings
Class A buildings are traditionally the cream of the crop. They're typically in great, central locations and potentially business districts, and they have a fair amount of space. Class A buildings also typically have the best infrastructure and tech capabilities, advanced HVAC and great amenities. They may boast a sprawling food court with lovely restaurants, an indoor atrium and top-end, luxury finishes. They often also have great design features and energy efficiency. These buildings are highly desirable and therefore have high occupancy rates. When you have a Class A building, you're vying for the office tenants who are most sought after.
Class B office buildings
At Class B, office buildings are slightly older than Class A but are still likely to have good tenants and excellent management. An office building that is Class B and on the market is likely to attract investors seeking to renovate or otherwise improve the building and boost it back to a Class A rating. Overall, Class B buildings are likely to be well maintained, have good technological capability and HVAC systems. They might be located slightly off the main street. Overall, Class B buildings are of good quality and good amenities but are not of the premium quality of a Class A office building.
Buildings perhaps past their prime populate the Class C category. They typically have more than 20 years under their belts and need some love. They might have some amenities, such as a lobby attendant but overall lack the wow-worthy add-ons of higher-class buildings. For example, they may not have central air or on-location parking. But when it comes to Class C buildings, the price is often right — so if you're a tenant looking for a deal and don't need the bling, Class C office buildings can provide an economical alternative for your office space.
All office buildings have their benefits
Every office building has its benefits, from economical office space for tenants to exceptional amenities and finishing touches. It's important to remember that each class of office building also competes for different potential tenants. Not everyone wants a luxurious atrium and Italian marble flooring — and many tenants prefer affordable solutions without the frills. The key is to find the right tenants for the building you have or attract the appropriate tenants for the building you choose to buy.