You must have noticed by now that we often use terms such as Class A office space. Let’s talk more about office building classification so you can fully understand the terminology.
Commercial office space refers to all commercial properties that offer 1 or more rooms fit for business activities, office-related or administrative work, such as meetings, etc.
There are three different building classifications within the specter of commercial office space, Class A, Class B and Class C. The standards that define office building classification may vary from market to market, but there are some general definitions and characteristics that can help with determining what the property type is.
Class A buildings
Class A commercial office space is the most prominent office space, generally in every market. Class A commercial real estate properties are usually new(er) buildings, well constructed and the ones that offer blue-ribbon infrastructure to their tenants.
They can be identified by their appearance too, since maintenance and upkeep on class A buildings is highly prioritized. Great amenities, eco-friendly solutions, upgraded fixtures can be considered a standard among the classification of buildings.
The high cost is associated with Class A office space as well, due to the fact that they are highly accessible and located in high-traffic areas, usually near major roadways or airports.
Class A buildings are most likely professionally managed by an eminent company, which will attract many long-term tenants, as well as command the highest rents.
Class A office was developed in the eighties, benefiting from noticeable advancements in the coworking and high-tech industry. The contractors have now learned how to make larger floors, and have found ways to support ceilings with fewer columns throughout the space.
The other major improvement was more efficient HVAC systems. Larger capacity with smaller zones allowed the tenants to control their own temperature within. With the non-opening windows, landlords could control the use of heat and air conditioning.
The ‘world’ of financing class offices also loosened up a little, allowing landlords to finance above the actual cost of construction and compete with other buildings through rent discounts, free and extra tenant improvements.
Class B buildings
Considered to be a slight downgrade from Class A properties, Class B buildings are still worth a lot in the commercial real estate world. These properties offer many benefits like class A, such as professional management, good accessibility and quality tenants without the extra costs. Building Class B is a bit older, but still has good infrastructure and is well maintained.
Investors find Class B office space appealing because their value can be easily increased with some simple tweaks and upgrades, thus restoring their Class A glory once again.
Class B office space is usually a little newer and a little larger. In the office market, the Class C buildings are mostly built in 1960, often with walk-ups or retail stores, and the Class B office space is generally developed after 1960 and until 1984, with several columns spaced around the floor, which makes it difficult to layout offices.
The floor sizes in Class B office space can be up to 10,000 sq ft, with elevators that work, ‘dated’ restrooms and HVAC systems that are usually not very efficient.
Class B office space is usually leased in three to five-year terms, assuming that the business in the CLASS B building is growing and making money.
Class C buildings
Coming in the last place and considered to be the lowest classifications of office buildings and space is building Class C. These are older buildings (usually 20 years or older) which are located in less desirable locations and often require a lot of renovation and work.
Speaking from the point of architecture, Class C buildings are the least enticing and their infrastructure is outdated. As a result of that, these buildings have the lowest rental rates, are often targeted as re-development opportunities and take the longest time to lease.
With dedication and work, Class C properties might restore their building Class B status but are not likely to ever become class A (there is a very slim chance), largely due to their location.
Which building classes are the best?
Nobody can decide which type of commercial office space is best suited for your needs, but you.
The answer to which one is the best really depends on what you’re looking for in a property. If you are an investor who can afford to spend money and time on renovations, then Class B or C properties might be the best fit for you.
If you are on the other hand, a small business that doesn’t need a space that offers much exposure, then go for Class C property.
Class A commercial property might make sense if you are a business that is focused on innovation and technology, and higher rent for all the extra amenities is a good investment.
Your mission, your finances and your needs play a crucial role in the decision-making process and choosing the right commercial office space.
All of the above explains why Tenant Representative brokers and Landlord agents have gotten more specialized and experienced in their job over the last 15 years. In order to excel you have to know all about your client’s needs.
Some buildings work better for certain types of tenants, medical and legal are good examples, and an experienced commercial broker, who knows his market and the owners and buildings within that market, should encourage a client to pursue one building over another in their building search or accommodation.
We make sure that the tenant is fully aware of all of the good and negative sides of the building considered, their owners and some property management questions.
No matter if you know exactly what you’re looking for or not, IPG real estate experts will assist you in finding the optimal space for your commercial office and help you to understand the building classes of commercial real estate. Bringing professionalism and dedication to the table, we won’t stop working until you have closed on the property perfectly suitable for you. Contact us today and see why our team has been successfully operating in San Francisco for a long time.
