Commercial Real Estate Building Classifications Part II

Building Classifications Part II: Explained

BOMA’s CRE Building Classifications

BOMA’s metropolitan base lists three Commercial Real Estate Building Classifications. In order to compare properties across international markets, landlords and property investors typically use a separate international base. However, the metropolitan base is used within a single office market. It is what our clients, strictly tenants, encounter most.

Classification: Class A

Class A buildings receive the highest Commercial Real Estate Building Classifications. This is because they are usually the top-quality buildings in their market and compete for high quality office tenants. These buildings are close  to popular amenities and transportation and easily accessible. A convenient commute is important to tenants and visitors.

Age is only a number when it comes to Class A buildings. As long as renovations have been consistent and the building finishes and systems are current and state-of-the-art, even an old building can be labeled as “Class A.” As a result, many Class A buildings have fascinating exterior architecture or iconic local character.

The desire for sustainability continues to increase. As such, the importance of green building infrastructure plays an ever increasing role in Class A determination. Building ownership and current tenant rosters also add to the mix of considerations. Good reputations are key. Because of their market presence and high-quality features, Class A building landlords usually price their square footage above average for the area. Their goal is to attract tenants who are able and willing to pay it.

Classification: Class B

Class B buildings are “average” in their markets. Landlords of these properties compete for a wide range of office tenants. Therefore, they price their buildings around the average rate per square foot. These buildings may be in slightly less desirable locations or might be less accessible to major roadways than Class A buildings.

Tenants looking at Class B space will find average or slightly better than average finishes and building systems in place. Sustainability renovations in Class B buildings may be smaller scale than in their Class A counterparts. In addition, the building may be older and have more dated architecture and interior design. Class B building are adequate in every way but are cannot compete with Class A buildings at the same price.

Classification: Class C

Class C buildings could be considered slightly “below average” in their markets. These properties compete for tenants by offering functional space at a low price. As different parts of a city experience a natural rise or fall in investment and popularity, market popularity shifts. Companies can move, if their location decreases in popularity. Unfortunately, buildings can’t move from one market to another.

Class B buildings that suddenly find themselves in a less popular market may drop from Class B to Class C. This is important to understand. Some Class C buildings may fall short of expectations. Others, however, will have all the desirable attributes of a Class B building without the convenience or proximity.

For the most part, tenants looking at Class C buildings can expect average or below average building finishes and systems. These buildings might be showing their age a bit more than others. As a result, it may also be easier to negotiate flexible lease terms with a landlord of a Class C space.

Making a decision of this magnitude is never easy. It’s always best to tour a building first before making a quick decision based on subjective classes. And, as always, your tenant rep broker is available and ready to help guide you through the process.


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