Urban or suburban, high-rise or low-rise, new or outdated, aesthetically pleasing or modest. These are only some of the aspects that help commercial real estate brokers differentiate between office buildings and determine their market value.
Although there are no formal standards for classifying buildings, there is clearly a need for some generally accepted guidelines to better distinguish them. To this end, The Building Owners and Managers Association (BOMA International) proposed three main categories: Class A, Class B, and Class C properties. Naturally, many elements play into this type of “grading”, but most of them revolve around geographical and physical characteristics. For instance, a prestigious address and an imposing look may indicate a Class A office space, while a more remote location and a less impressive exterior would more likely point to a Class B or even a Class C property.
Understanding these office building classes is useful when you’re looking for a new workspace for your business, but it’s important to know that the classification is not set in stone. What may qualify as Class A in one market could easily be Class B in another, depending on the location and competition. Just picture an amenity-rich mid-rise office in a suburban area then place it among LA’s skyscrapers. Needless to say, the latter command higher rental prices and boast premium technological capabilities, top-notch management, and an undeniable visual appeal that the mid-rise building lacks.
This ranking, then, is more an art than an exact science. Still, it can help narrow down your search for the ideal office space for you or a client, so it’s worth taking a more detailed look at what these building classes generally entail.
What is a Class A office building?
Class A office buildings are the most prestigious and visually striking of the group, but there’s more to them than meets the eye. According to BOMA, these are “competing for premium office users with rents above average for the area” and have “high-quality standard finishes, state-of-the-art systems, exceptional accessibility, and a definite market presence.”
They are the cream of the crop of the commercial real estate world, typically attracting influential law firms, banks, or tech companies. With such distinguished buildings as their headquarters, tenants can leave a top-notch impression on employees and clients alike.
Class A office spaces tend to be newly built high-rises towering over surrounding buildings. But it’s not uncommon to have an older, historical property revamped to meet 21st-century needs while retaining an inviting, vintage flair.
Besides the pleasing interiors and exteriors, you’ll likely find first-class management services and a seemingly endless list of amenities, that might include everything from ample parking spaces and valet services to outdoor areas, beautiful lobbies, and modern lounges. For instance, many WeWork locations offer kitchens, coffee bars, event spaces, game rooms, gyms, and libraries. But that’s not all – some may even impress with rarely met additions such as hammocks, karaoke rooms, swimming pools, or rock climbing walls.
Flexibility can be yet another factor that makes Class A buildings stand out from the crowd, and this also shows in WeWork buildings across the globe. Members have a wide host of flexible workspaces at their disposal, ranging from dedicated or hot desks to private and full-floor offices.
What is a Class B office building?
Class B office space is a small step down from Class A properties. It could be a bit older (built in the last 10-20 years) but still in fair to good condition, only a few stories tall, and located in suburban areas or peripheries. Tenants who seek out these buildings don’t need to be in the heart of the action, nor do they need to exude prestige. Rather, they are looking for a fully functional and convenient workspace that goes easy on the pocket and meets their business needs. These spaces are typically occupied by smaller, local companies.
Other distinguishing elements between Class A and Class B buildings include the amenity package. The latter will offer less compelling perks and benefits, but will still meet basic expectations with parking spots, meeting rooms, security systems, shared outdoor/indoor spaces, and the like.
What is a Class C office building?
Older commercial real estate buildings set in less desirable areas of the city constitute Class C properties. Generally, they need extensive renovations and repairs, as their infrastructure and technology tend to be outdated. Service-oriented or family-run businesses often occupy these spaces for rents that are below the average for the area. It can also happen that investors target them as redevelopment opportunities as a way to upgrade them to a Class B status.
Key Differences between Class A, Class B & Class C
As we’ve seen before, the age, location, condition, rental income, and amenities of a property are among the main differences setting the three categories of commercial real estate buildings apart. With a bit of investment, it’s possible to turn Class C buildings into Class B or to upgrade Class B spaces to Class A offices. However, it’s highly unlikely that a Class C building will ever acquire a Class A status given its age and remote address.
Navigating these differences will be useful in your search for the optimal office. Although more inviting, Class A buildings are often not the most reasonable solution for every business. It’s important to carefully consider your needs before splurging on a space that offers more than what your company actually has use for. Still, if you want to establish a strong market presence and prestige plays a crucial role in your business growth, then investing in a Class A building is the way to go.
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