Anyone who’s had a few different homes throughout their life knows there’s a difference between a college dorm and a 5 bedroom estate in the suburbs. The same is true for office spaces. But when searching for new office space, your time and attention is limited, making it important to know more than pictures can show.
Of course, anyone knows a luxury or high-end building when they see it, but real estate professionals take a different standard when rating their top prospects, which come in four different office building classifications: Class A+, Class A, Class B, and Class C.
While it’s easy to distinguish between the quality of these properties based on the traditional grading system, it’s important to remember that determining these distinctions is more of an art than an exact science.
What are the Different Office Building Classes and How are They Determined?
As we mentioned above, there are four classes of rating systems for commercial real estate listings. Before we dive into the differences between the different classifications, let’s take a minute to discuss the factors involved in establishing them:
How are Building Classes Determined?
There are multiple factors that help real estate professionals determine the class of an office building they need to categorize before the listing can go forward. But it’s also important to remember that there are no industry guidelines for building classification. In fact, BOMA (Building Owners and Managers Association) generally resists the publication of building classifications for specific properties, though most real estate professionals base their judgement on current market availability and comparisons to similarly sized properties above all else.
Other characteristics include, but are not limited to:
Building construction material quality and age
Finishing materials and design
Maintenance and upkeep
Capacity of essential services for current and future growth (HVAC, electrical, Internet, maintenance, upkeep, elevator, lobby, power backup, parking, and common area spaces)
Access to major freeways or public transportation
Construction and common area improvements (either current or ongoing)
Amenities and secondary features (cafes, day care, cafeterias, dry cleaning, copy and mail services, fitness centers, etc.)
Explaining the Differences Between the Classifications
The four rating classifications for office buildings help potential tenants, landlords, investors, and real estate brokers easily compare buildings within a certain market, but they don’t provide a global rating for comparative building spaces. For example, there’s a considerable difference between a Class A building in Boise, Idaho and Manhattan. That’s why it’s important to remember that these properties are rated relative to comparable markets rather than a larger scale, where they may not hold relevance.
As you might imagine, Class A+ buildings are the cream of the crop in the commercial real estate market. They offer the finest available materials, best building standards, greatest array of facilities and amenities, easily accessible transportation, prime locations, and stunning views. These properties are typically few and far between, expensive, and highly sought after within their specific markets.
Also referred to as “trophy buildings,” these properties are unique in their technology, design, or sheer prestige. Sears Tower in Chicago, the Empire State Building in New York, or One World Trade Center in Lower Manhattan are examples of Class A+ buildings in the United States.
Class A+ tenants can expect a greater allocation for onsite parking for both clients and employees, on-site cafes, restaurants, banking services, mail facilities, gyms, spas, communal areas, daycares, and more.
Class A buildings are known for their proximity to central business districts in their markets, often competing for high-level tenants with global name recognition. They tend to have high occupancy rates, few tenants with greater space or floor needs, and top-notch amenities few businesses can afford.
Restaurants, cafes, fitness centers, spas, atriums, day cares, and even retail shopping within the lobby floor are common in Class A buildings. But with no expenses spared, there’s a good chance a Class A building will also be adorned with tasteful decor, modern interior design aesthetics, and high ceilings with employee-friendly overhead lighting. For most markets, these properties are the best of the best and they deserve the higher costs associated with occupying (and enjoying) them.
Class B buildings tend to be within 10-20 years behind the most current developments in a specific marketplace, perhaps offering similar amenities, but suffer by comparison. Their maintenance, HVAC, and electrical capabilities may not be up to par in terms of current standards, as would the fiber optic and communications infrastructure, but still offer a valuable, competitive office space for most high-to-mid level clientele.
These facilities are routinely updated, improved, and remodeled to tenant expectations, making them an excellent value for potential tenants looking to impress their employees and clients without taking on a Class A-level commercial lease agreement.
Class B buildings are often located off Main Street, offer fewer security and parking opportunities, and require more routine construction and maintenance than a Class A building, but are functional, attractive, and capable of housing modern businesses of any stripe.
While there are no “Class D” or “Class F” buildings in commercial real estate, Class C tends to scrape each of the latter categories into one. Class C buildings are older (at least 20 years old) and are well-worn.
Multiple tenants over multiple decades have occupied each space, leaving the wear and tear that comes with generations of business taking its toll. They also lack modern expectations of lobby attendants, security, and concierge services, making them less attractive than modern constructions that have these amenities as standard items.
Any building lacking elevator services, lobby personnel, on-site parking, or HVAC will generally earn a Class C rating sight unseen. But for small businesses that rely on low overhead and competitive lease terms, Class C spaces can provide a great jumping off point for those just getting started.
What Potential Tenants Should Expect When Considering Different Office Space Classes
Competing for high class commercial real estate is important for companies seeking popularity on the street level, high visibility in major cities, and those servicing boutique clientele, but there’s an important aspect to keep in mind: these classifications are subjective and don’t always reflect the quality of service a company provides.
When searching for a potential new commercial real estate space, it’s important to consider your specific needs above all else. Classifications are secondary; the property’s capabilities in servicing your company’s specific needs should be considered above all else. While companies in legal, investment, or luxury industries should seek out higher class real estate to attract higher paying clients, most should focus on their overhead, a property’s amenities, and servicing both employees and clients to the best of its ability.