Patrick McGregor 
Office building classes help commercial real estate investors, tenants, and brokers compare properties in the same market, which helps justify asking rents and asset pricing.
Office buildings may be classified as Class A, Class B, or Class C. In addition, investment, institutional and speculative are three designations used when comparing office buildings among several metropolitan markets.
Unlike financial measurements, such as cap rates and ROI, classifying an office building is rather subjective and is more art than science. While there isn’t a step-by-step guide to classify office buildings, there are some generally accepted guidelines.
Office Building Classes
The class that an office building is classified as varies from market to market, and even from submarkets and neighborhoods within the same metro area.
While office building classes do have their limitations, the designations are useful when properly applied. The Building Owners and Managers Association International (BOMA) has set the standard for measuring buildings for more than 100 years. BOMA provides three metropolitan base definitions for office buildings:
Class A
These are prestigious buildings that were recently built or renovated. They have above-average market rents for premier office users. They have high quality finishes, state-of-the-art systems, with easily accessible locations. They are also likely well-known within their respective submarket or market.
Class A+ buildings, sometimes referred to as “trophies,” are buildings that often define the skyline of their respective cities. This classification is reserved for the most iconic buildings in the market.
Features that set Class A and A+ office buildings apart from the rest include significant size for the area, premier tenants with high occupancy rates, and outstanding on-site amenities—such as concierge service, green space, and restaurants.
Class B
These buildings are fair to good with average market rents for the area. Standard finishes are average to above average, and systems are well-maintained and adequate. However, Class B office buildings do not compete with Class A at the same price.
Class B office buildings are normally 10 to 20 years old and have systems and finishes that are adequately maintained but may be outdated or suboptimal. These properties appeal to a wide variety of tenants and offer a fair value for the market.
Class C
These buildings offer tenants functional space at rents that are below market averages. Class C office buildings are usually low-rises that are more than 20 years old, and often lack modern amenities, such as a lobby or central HVAC.
Additionally, Class C properties are often in less-desirable locations and may be poorly maintained with out-of-date floorplans. These properties can be a good match for the no-frills tenant looking for economical office space to lease.
How to Classify Office Properties
One of the biggest challenges of office building classifications is that there isn’t a set standard. For example, a Class A property in a market like Nashville could be considered Class B in Manhattan.
Furthermore, because office building classes can be subjective and do vary from place to place, BOMA does not recommend publishing classification ratings for individual properties. However, commercial real estate brokers still need a way to compare office buildings to one another.
Some of the specific building characteristics office brokers and investors use might include:
- Location within specific office submarkets
- Urban versus suburban markets
- Access to highways and public transit
- On-site and nearby amenities, such as restaurants, banks, and health clubs
- On-site or off-site parking
- Original construction date
- Size of the property
- Date of any major improvements or updates
- LEED certification
- Lobby and common area amenities, like mail collection, daycare centers, and food courts
- Security and safety infrastructure
- Backup power
- Elevator systems, including the number of elevators and their capacity
- Central or independent HVAC systems
- Ceiling heights
- Load factor, which compares the amount of usable space to rentable space
International Building Classifications
In addition to building class, BOMA also suggests three international base definitions. These can be used by investors and commercial real estate (CRE) brokers when comparing properties among several metropolitan markets.
Investment
Investment properties are located in prime metropolitan markets with state-of-the-art construction and facilities, as well as quality tenants and building management. They also offer tenants a wide variety of high-level amenities. Investment-grade office buildings are often named for one lead tenant or a specific location, such as One World Trade Center or the MetLife Building.
Institutional
Institutional classifications apply to large properties with good design and construction and a stable tenant base. They may be located in both urban and suburban areas, and have a sufficient size and stature that makes the office building attractive to large national or international investors.
Speculative
Speculative buildings are typically large, although size requirements may be lower in premier office markets. Additionally, they are usually occupied by multiple tenants and conform to the popular design convention at the time of construction with a focus on functionality as opposed to aesthetics or the image of a specific tenant.
Subjectivity: The Name of the Game
Because there are no industry-wide standards for office building classes, it’s important to only use classifications to compare buildings in the same neighborhood or market. For instance, age, location, infrastructure, amenities, and tenant quality are some of the main criteria used in office building classes.
