Determining the Class of an Office Building

Office buildings can range in style from caviar to Spam, from a Bentley to your Dad's old beat up Datsun, from plush velvet to itchy polyester. You know a luxury building when you walk in, from the reverent "wow" that forms in whisper on your lips. You recognize pitiful office space from the fluorescent light headache that settles onto your temples and the musty odor that penetrates your nose.

Real estate professionals rate buildings only slightly less subjectively.

A loosely designated Class A, Class B, and Class C rating system helps tenants, landlords, investors, and brokers identify and compare buildings that compete against each other for similar tenants. Buildings are classified based on such parameters as age of building, technological capabilities, quality of HVAC systems, location, building infrastructure, how well the building is maintained, and amenities. Amenities, usually provided in-house, include such features as cafés or food courts, dry cleaning, copying services, mail collection service, fitness centers, or day care centers.

These classifications are very subjective, and what's more, they vary widely between markets. A Class A building in Richmond, Virginia, for example, may have little in common with a Class A building in Manhattan, New York City. Class B and Class C buildings are generally rated relative to Class A buildings in each market.

Class A

Class A buildings are coveted, highly sought spaces of significant size, usually in a central location. In a central business district, this could mean 250,000 square feet or more of office space; in a suburban location or smaller metropolitan area, a 50,000 square foot building might qualify. These prestigious buildings compete for premier office tenants. They have high occupancy rates and often will house only a handful of notable companies.

Size and location are only part of the equation, however; Class A buildings possess top-notch qualities that demand higher rents, like superior infrastructure, state-of-the-art technology capabilities, high-tech security, and the latest in elevator and HVAC systems.

Amenities abound for tenants of a Class A building. Concierge and outstanding security services are standard. A Class A building may have an indoor atrium featuring abundant greenery and a soothing water feature. Another may have a food court with cafés, restaurants, and coffee shops for workday breaks. Mail collection and copying services are often in-house, providing a valued convenience. On-site parking is another frequent amenity of this building class.

Systems and amenities are important, but aesthetics are what really give Class A buildings the "wow" factor. Finishes can be mahogany and imported tile, lobbies are luxuriously appointed with marble and glass, and the whole building exudes professional elegance.

Overall architectural design also tends to be notable in Class A structures, employing the latest technology for benchmark-setting efficiency. Arresting architecture draws attention and brands the building as an image-defining office structure.

Class A buildings aren't always new buildings--renowned structures with stellar ownership in prime neighborhoods are often Class A buildings due to market presence. They compete with other prestigious buildings for the same kind of discerning, image-conscious client.

Class B

Class B buildings are older, generally between 10 and 20 years old, and almost always have had previous tenants in the space. Technological capacity is good, but not best-in class; elevator and HVAC systems are functional but not industry-leading. Finishes are good to higher quality, but perhaps a bit outdated.

These buildings compete for a wide range of tenants, with rents around average for the market. Tenant improvements are generally solid, and maintenance is very good. Class B buildings may be found in prime market locations, but on a side street rather than a main thoroughfare.

A Class B building may have an attended, professional, and attractive lobby of marble and tile, but perhaps not the fancy imported Italian materials. Security personnel may be on staff, but only on off hours. There may be some onsite parking options, although perhaps uncovered and not plentiful.

Class C

Class C structures are older buildings (minimum 20 years old, and often much more) and have a long history of occupation by other tenants. They may be run-down with out-of-date furnishings and poor maintenance services.

Where a Class B building may have a lobby attendant, Class C buildings have neither attendant nor lobby. No elevator, on-site parking, or central air conditioning should be expected when renting Class C space.

As they lack many modern amenities, these buildings rent functional space at below average rates. They therefore compete for no-frills tenants who desire a more economical option for office space.

Trophy Buildings

There is one more unofficial class known as "trophy buildings." These are cream of the crop buildings that are industry leaders in every respect--technology, architectural design, posh finishes, and environmental sustainability. These buildings are in the best locations and are the most exclusive.

Few buildings fall into this category, but the ones that do are widely known. 1 Bryant Park in New York City, with its one-of-a-kind architecture, urban garden room, highest quality finishes, and state-of-the art systems is an excellent example of a trophy building. The Transamerica Building in San Francisco and Sears Tower (Willis Tower) may also be considered trophy buildings despite their age, due to striking architecture, prestigious business location, state-of-the art amenities, and iconic stature.

Tenant considerations

While the A, B, and C classifications may bring to remembrance the A, B, and C (and D and F for some of us) classifications of high school assignments, there is no need to stress about achieving "A" office space. It is important to remember two things: 1) the three classes of buildings compete for different kinds of tenants, and 2) the building classifications are very subjective.

Not every business needs a building that knocks clients' socks off. These structures are for tenants like law firms, investment firms, and other companies that rely on image to compete in their marketplace. Or they are a good fit for established, prosperous businesses that can afford the higher rents. Class B buildings are solid options for tenants needing a professional space with good maintenance and tenant improvement opportunities. Class C buildings are a good choice for tenants needing economical space during a time of growth.

As building classifications are subjective, they don't mean a great deal. A space could be classed A by a real estate broker, but really seem more like Class B to a tenant. A Class B space could have enough amenities to make it feel like Class A to a company owner. The bottom line? Company owners should find the space that suits their businesses, and not try to match a letter grade. After all, we are graded on lots of things in life--who needs to be graded on office space?