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. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
Unlike financial measurements, such as cap rates and ROI,\nclassifying an office building is rather subjective and is more art than\nscience. While there isn\u2019t a step-by-step guide to classify office buildings,\nthere are some generally accepted guidelines.<\/p>\n\n\n\n
The class that an office building is classified as varies\nfrom market to market, and even from submarkets and neighborhoods within the\nsame metro area. <\/p>\n\n\n\n
While office building classes do have their limitations, the designations are useful when properly applied. The Building Owners and Managers Association International (BOMA<\/a>) has set the standard for measuring buildings for more than 100 years. BOMA provides three metropolitan base definitions for office buildings:<\/p>\n\n\n\n These are prestigious buildings that were recently built or\nrenovated. They have above-average market rents for premier office users. They\nhave high quality finishes, state-of-the-art systems, with easily accessible\nlocations. They are also likely well-known within their respective submarket or\nmarket.<\/p>\n\n\n\n Class A+ buildings, sometimes referred to as \u201ctrophies,\u201d are\nbuildings that often define the skyline of their respective cities. This\nclassification is reserved for the most iconic buildings in the market.<\/p>\n\n\n\n Features that set Class A and A+ office buildings apart from\nthe rest include significant size for the area, premier tenants with high\noccupancy rates, and outstanding on-site amenities\u2014such as concierge service,\ngreen space, and restaurants. <\/p>\n\n\n\n These buildings are fair to good with average market rents\nfor the area. Standard finishes are average to above average, and systems are\nwell-maintained and adequate. However, Class B office buildings do not compete\nwith Class A at the same price.<\/p>\n\n\n\n Class B office buildings are normally 10 to 20 years old and\nhave systems and finishes that are adequately maintained but may be outdated or\nsuboptimal. These properties appeal to a wide variety of tenants and offer a\nfair value for the market. <\/p>\n\n\n\n These buildings offer tenants functional space at rents that\nare below market averages. Class C office buildings are usually low-rises that\nare more than 20 years old, and often lack modern amenities, such as a lobby or\ncentral HVAC. <\/p>\n\n\n\n Additionally, Class C properties are often in less-desirable\nlocations and may be poorly maintained with out-of-date floorplans. These\nproperties can be a good match for the no-frills tenant looking for economical\noffice space to lease.<\/p>\n\n\n\n One of the biggest challenges of office building\nclassifications is that there isn\u2019t a set standard. For example, a Class A\nproperty in a market like Nashville could be considered Class B in Manhattan. <\/p>\n\n\n\n Furthermore, because office building classes can be\nsubjective and do vary from place to place, BOMA does not recommend publishing classification\nratings for individual properties. However, commercial real estate brokers\nstill need a way to compare office buildings to one another.<\/p>\n\n\n\n Some of the specific building characteristics office brokers\nand investors use might include:<\/p>\n\n\n\n In addition to building class, BOMA also suggests three\ninternational base definitions. These can be used by investors and commercial\nreal estate (CRE) brokers when comparing properties among several metropolitan\nmarkets.<\/p>\n\n\n\n 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<\/a> or the MetLife Building<\/a>.<\/p>\n\n\n\n Institutional classifications apply to large properties with\ngood design and construction and a stable tenant base. They may be located in both\nurban and suburban areas, and have a sufficient size and stature that makes the\noffice building attractive to large national or international investors.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n Because there are no industry-wide standards for office building classes, it\u2019s 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. <\/p>\n","protected":false},"excerpt":{"rendered":" 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…<\/p>\n","protected":false},"author":63,"featured_media":36865,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[796,10609],"tags":[11172],"class_list":["post-36864","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-how-to","category-useful-tools","tag-old-how-to"],"yoast_head":"\n<\/span>Class A<\/span><\/h4>\n\n\n\n
<\/span>Class B<\/span><\/h4>\n\n\n\n
<\/span>Class C<\/span><\/h4>\n\n\n\n
<\/span>How to Classify Office Properties<\/span><\/h2>\n\n\n\n
<\/span>International Building Classifications<\/span><\/h2>\n\n\n\n
<\/span>Investment<\/span><\/h4>\n\n\n\n
<\/span>Institutional<\/span><\/h4>\n\n\n\n
<\/span>Speculative<\/span><\/h4>\n\n\n\n
<\/span>Subjectivity: The Name of the Game <\/span><\/h2>\n\n\n\n