In commercial real estate, office buildings are primarily classified into three categories: Class A, Class B, and Class C. No two office spaces are constructed the same. Each office space type is differentiated based on its age, location, price, amenities, and existing conditions. Understanding how commercial buildings are classified is extremely important for tenants or investors to acquire the perfect office space for their growing business.
In this blog, we will explain the features and limitations of Class A, Class B, and Class C office spaces. You will also discover what key factors to consider while choosing your ideal business space.
What are Building Classifications?
Key Differences Between Class A, Class B, and Class C Office Buildings
A property’s “building class” usually provides information about its age, location, finishes, amenities, existing condition, sales price, and rental rates. The Building Owners and Managers Association (BOMA) prescribes a three-tier rating system to group office buildings into classes. Also known as Metropolitan Base Definitions, these building classes are subjective, indicating the competitiveness of each building to attract a particular type of tenant.
Commercial real estate brokers use building classification to report market data, justify rental rates, concessions, and required lease length for the building. Building classifications also help commercial tenants or buyers determine if a property suits their budget and aesthetics.
While there is no absolute formula for classifying an office space, brokers will generally differentiate Class A, B, and C buildings on these factors:
- In what neighborhood the building is located? Does the location have access to public transportation and essential services like parks, shopping centers, hospitals, etc?
- How old is the building and what is its current condition? Are there any pending upgrades?
- What is the condition of infrastructure like HVAC, technological systems, and security?
- Are there amenities like restaurants, bars, retail shops, childcare, and fitness centers within or near the office building?
- What is the aesthetic character of the building? For example, the architectural style can be modern or historical.
- What is the quality of materials and construction methods used? How well-maintained are the hardware and finishes on the building?
- What are the rental prices charged in the building’s market?
Remember every market is different from the other. Meaning, a Class A office building in Florida cannot be compared to a Class A office in California or New York City where high-end commercial real estate dominates the market.
Let’s explore all three building classification types: Class A, B, and C in detail.
1. Class A Office Space
A Class A office space is the jewel crown of the commercial real estate market. These are the newest buildings (5-7 years old) with the most premium interior systems, ideal accessibility, modern amenities, 24/7 security, and a prime market location.
Class A office spaces are usually occupied by elite, high-credit tenants willing to pay above-average rental rates on long-term leases. For example, financial or law institutions, real estate companies, engineering firms, architectural firms, life insurance firms, and political groups. These businesses strive to make a lasting impression with Class A properties on both their employees and clients.
Because of their expensive offerings, Class A offices demand the highest rents among all classes. According to a new US Office report from Savills, Class A availability is now higher than that of B and C, with properties asking 25% more on average.
Top Features of Class A Buildings
- Aesthetically charming interiors and exteriors
- Updated mechanical systems, technological, and infrastructural finishes
- High-rise buildings
- Location near major transportation hubs
- 24/7 security and concierge services
- Quality maintenance
- Lifestyle amenities (gyms, cafés, daycare, stunning lobbies, valet services, high-speed Wi-Fi, ample elevators, etc.)
- A high-ratio covered parking
- LEED or any other Green Building Certification
- On-site property management
- Private outdoor space
- Other premier tenants in the building
Examples of Class A Office
152 West 57th Street (Carnegie Hall Tower)
Carnegie Hall Tower, a 60-story class A office building, offers stunning views of Central Park, the Hudson River, and Manhattan. The mid-rise floors are column-free for flexible interior design. Windowed corner offices on each floor offer panoramic views in four directions. The base features 24 flexible floor plates, allowing firms a full floor presence. The commercial office building has amenities like food service, security, a property manager on-site, a concierge, and access to transportation.
The 25-story Plaza District office tower on 61st Street and Madison Avenue offers iconic features like a Statue of Liberty entrance and historical lobby decor. Located in a prime shopping area, the Class A office space includes top-notch amenities: a café, conference center, fitness center, and golf simulator. The bespoke office interiors feature high-end finishes, wood floors, tall ceilings, and expansive windows. The Class A building is conveniently located with three subway stations nearby.
2. Class B Office Space
Striking a balance between Class A and C, Class B office spaces focus on functionality over the luxury and exceptional management typical of Class A buildings. They are usually 10-20 years old, and so offer more affordable rental prices than Class A offices. You will find Class B offices near a central business district with moderate-level architectural design, structural features, interior finishes, functional floor plans, and decent maintenance.
Tenants who prioritize function over form, ensuring their employees get a modern workspace usually occupy these buildings. Some of the Class B tenants include IT firms, call centers, creative services, and other local businesses.
Value-driven investors acquire Class B office spaces as investments with the intent of renovating them later into Class A buildings through quality tenant improvements.
Top Features of Class B Buildings
- Typically fewer than 10 stories
- Location near central business districts
- Conference rooms and common areas
- Serviceable HVAC, internal finishes, and fixtures
- Cafe dining options
- On-site parking (some are uncovered)
- Bike storage
- Adequate accessibility
- On-site management and upkeep
- Enough technological capabilities
- Shared outdoor space
- Security
Examples of Class B Office
Downtown Miami’s Class B office is at 44 West Flagler Street, located in Miami Central District. The building has easy access to major expressways like I-95, 836 Dolphin Expressway, and 826 Palmetto Expressway. Recent upgrades include smart elevators, a fitness facility, conference rooms, and 24-hour on-site security. Managed by a build-to-suit company with quality institutional ownership, this office has nearby restaurants, shops, parking garages, and mass transit options.
Located near Houston’s Washington Avenue Memorial Park and Loop 610, 4801 Woodway is a Class B office building renovated in 2015. It features six atriums, contemporary interiors, and integrated technology. Amenities include furnished conference rooms, on-site management, 24-hour security, and outdoor seating. The Class B space offers a functional workspace for businesses in a prestigious area.
3. Class C Office Space
Deemed as the lowest rating classification, a Class C office space stands out as the most budget-friendly option among all. Typically 20 years old or more, these office buildings facilitate standard upgrades but lack amenities like parking, elevators, central A/C, lobbies, etc. They are situated outside the central business district in less desirable locations of the market.
Since a Class C office space may need extensive repairs or tenant improvements, they are sold at below-average rates on shorter lease terms. Blue-collar workers, service-oriented businesses, or industrial tenants that don’t give prominence to aesthetics or location are mostly Class C tenants. For example, startups, NGOs, construction companies, engineering, security, and other small businesses.
In commercial real estate, Class C buildings are often marketed and sold as redevelopment properties. For example, a Class C building can be renovated into a flex space, accommodating different types of businesses and work environments.
Top Features of Class C Buildings
- Basic structural infrastructure
- Outdated architectural designs
- Traditional floor plans
- Poor market presence
- Break rooms
- On-site parking
- Lacks modern amenities such as parking, a lobby, and a centralized HVAC.
Choosing Your Ideal Office Space
The decision to go for Class A, Class B, or Class C office space depends on your budget, image, and company requirements. Does your office need a grand, aesthetic lobby for charming visitors? Or will individual workstations and meeting rooms be enough? Are there any financial restrictions?
Building classifications are subjective as they differ across various real estate markets and the amenities offered. Each building class fulfills the needs of different commercial tenants, hence, it is important to align your choice with present and future business goals. Here are the scenarios in which we recommend opting for Class A, B, or C office space.
Choose Class A Office Space:
If a beautiful facade projecting your company image, prime location, and impeccable management are your topmost requirements, then a Class A building is the best choice for you. Leasing or buying a Class A property sends a message that your company is an industry leader and helps attract high-profile clients. Class A office spaces command expensive acquisition costs, so if budget isn’t a problem, think no further.
Choose Class B Office Space:
If you are looking for that perfect balance between quality and affordability, a Class B office space is the right bet for you. These offices are ideal for companies that want a functional workspace near a central business district, without overspending.
Moreover, specific Class A features are included in Class B buildings, for example, modern interiors and exteriors, parking, as well as on-site management. Since the rental rates of Class B buildings are considered at-market, they are suitable for many types of businesses.
Choose Class C Office Space:
When cost is your primary concern and your business doesn’t require a lavish outer appearance or service high-end clients, then leasing a Class C office space is ideal. Though these spaces are the most budget-friendly, they may have dated facilities and ordinary locations. Evaluate whether these compromises related to these types of offices align with your future goals.
While deciding your ideal office between Class A, Class B, and Class C, it is important to consider location accessibility for your employees and clients. Ensure that the building’s technological infrastructure and sustainability features align with your business priorities. Finally, seek professional advice to examine and navigate leasing agreements, so that you can make an informed decision.
Final Thoughts
Building classifications Class A, B, and C have their distinctive features, but that doesn’t imply one is superior to the other. Overspending on a Class A office may not be justified if similar amenities can be achieved in a Class B building through tenant improvements. Likewise, choosing a Class C space would be inappropriate if your target clients are located in a central business district. The best decision you can make is finding an office space that fits your business needs. For that, office tenants must be able to identify the building classes of commercial real estate so they know what to expect at different property rates.
Whatever office building type you ultimately decide on, Constructive Solutions, Inc. will execute the project for you with quality workmanship, meeting your business requirements. Contact us today if you are looking for a trustworthy commercial general contractor in San Francisco, San Jose, or San Jose.
FAQs
What’s the difference between Grade A and Grade B office space?
Grade A office buildings are world-class facilities due to their exceptional finishes, central location, and solid management. Grade B buildings are much older or situated in a less central location, lacking the architectural grandeur and top management of Grade A buildings.
How much is the cost per square foot for a Class A office space?
Location greatly influences the cost per square foot for a commercial office building. For example, the average rent per square foot is $67 in San Francisco, whereas a high-rise building in New York City’s financial district will cost around $80 per square foot. In less central areas, rental prices can be $25 to $30 per square foot.
What are Class A+ office spaces?
The Class A+ office building is a level above Class A buildings, often standing as the main attraction of a city’s skyline. It is a self-contained business city built with premium architecture, advanced infrastructure, exclusive spaces, and state-of-the-art amenities. In short, Class A+ is the absolute best of the best.
Relevant Resources:
Constructive Solutions, Inc. is a full-service commercial construction company serving San Francisco and Bay Area.
Whatever your vision, we have the resources, experience, and insight to make your concept a reality, and a space where your business can flourish.
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