JH Berry & Gilbert, Inc

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CRE 101: How to Classify Office Buildings

August 1, 2016


Central Business District

Central Business District

By Michael Reilly

The classification of office space can often leave potential renters or buyers puzzled as to which type of office space is best for their business. Many factors affect how an office property is classified, including the age of the building, technological capabilities, location, efficiency and market perception – all of which can have a substantial impact on a businesses’ ability to perform and succeed.

There is no uniform system for classifying office space, and buildings are typically viewed in the context of their sub-market. However, the purpose of the rating system is to encourage standardization of office markets. Let’s take a closer look at the classification system and unveil what’s behind each designation.

Class A

Buildings with the highest quality infrastructure, attractive features and prime locations are generally labeled as Class A office spaces. Oftentimes, the age of a building is an important factor in categorizing a space. Class A buildings are typically newly constructed; however, renowned structures with a prestigious presence can also be labeled in the Class A category. Occupancy and rental rates for these properties are typically higher than those of Class B and C. It is important to note that what classifies as a Class A property in some markets may not rank as highly in others.

Class B

Most properties that are classified as Class B office space are well-maintained and in average to good locations. Typically, rent prices in these properties will reflect the market average and, therefore, will often have competition for tenant occupation. Class B properties regularly attract the attention of investors looking to renovate and restore the space to Class A potential.

Class C

Class C properties are typically not updated with modern finishes are often older buildings. These properties are often associated with lower rental rates and are occupied by businesses with a lower budget. In addition to being a more economical option for businesses to rent space, Class C properties are regularly the center of redevelopment projects.

While there are several factors that can affect the classification of a building, it is important to remember that buildings are subjectively classified based on existing market values. To find out more about an office’s classification, management and rental rates, it is best to contact an experienced commercial real estate broker who can provide insight into your specific market. For more information about office space classification in the Birmingham market, please call us at 205-313-4381.