By James A. Schnur, CCIM
President and Designated Managing Broker
Integrated Real Estate Solutions
Choosing an office space that aligns with a company’s goals, growth, and continued success requires balancing a number of factors. And with enough time and an endless budget, decision-makers could tour and thoroughly research every possible potential space available before whittling their choices down to a handful of top candidates for their new space. But for most business owners, this approach is unfeasible.
Fortunately, there is a shorthand classification system that companies can use to weed out certain spaces at a high level and feel more confident in the building choices as decision-makers hone in on which types of spaces would work best for their given business needs. This rating system, developed by the Business Owners and Managers Association (BOMA), ranks several building features on a qualitative scale to assign a letter grade to each building — Class A, Class B, or Class C. Because of variations in markets and the subjective nature of the ranking system, each ranking should be considered relative, rendering the system helpful from a macro perspective, but less informative when digging further into the details of a particular building. But every search begins somewhere, and understanding the ratings to quickly sort which spaces will definitively work or not from the start makes the search a bit easier.
Factors for Determining Building Class
There are four primary areas of consideration used to rank buildings into their various classes. And while each of these is important factors when evaluating a new space, they should not be the only details companies rely on when performing research, inspections, or checks on potential buildings to relocate to. However, these factors present a strong entry point into the viability of a space:
Where is the building physically located? What is the area like around the building? What types of businesses are near the building, and how accessible are they? What type of transportation is necessary to access the building? Is it near public transit? Does it require a car to access, and does the building have accessible parking?
Age and Condition
When was the building constructed? And how has it been maintained in the time since construction? Has the building ever been updated or modernized — in either the interior or exterior? Does the building meet the codes for modern electrical, plumbing, and HVAC needs?
Besides space, what does the building contain? What other businesses occupy the building itself? What is the state of the common areas? Are these areas and businesses that will make employees excited to work within the building, or will they be a hindrance or distraction?
The most subjective of the considerations, but still important — is the building interesting and pleasing to look at? Does it fit into the style of the surrounding area? Or does it stand out in a positive way?
As mentioned, these are qualitative details, so the classification for each building can be open to interpretation to a certain degree. But still, the rankings provide an invaluable resource when time, energy, and money make it difficult to get into a space and investigate its facets thoroughly. So what does each ranking actually mean for companies, and what are the incentives for considering each type of building?
Class A Buildings
Class A buildings are the most prestigious of their peers. They occupy the best locations within a business district, have modernized and attractive amenities, are easily accessible by employees and patrons, and are distinguished by their design choices. In large markets, the Class A ranking can even expand to include Class A+ buildings — generally, these are the buildings that contribute to a city’s skyline and are the most competitive areas to acquire space.
In general, Class A buildings will demand the highest rent from tenants to supplement their features and location. These buildings are also more difficult to secure space in, as they are able to more easily pick and choose their tenants from a list of excited potential bids. Renting space in a Class A building can provide a level of prestige for businesses, but may come at the sacrifice of more space, more customizable features, and more control at the negotiation table.
Class B Buildings
Class B buildings are buildings that are generally well maintained, provide functionality for a larger base of tenants, and have a more accessible rental rates at an at-market rate. Many of these buildings tend to age out of being Class A buildings, or they have not yet been updated with more modernized features. The locations for many Class B buildings are still near prime business districts, but in less-than-prime locations — namely, further from high traffic corners and corridors.
Class B buildings offer a reliable office space for tenants at a more economic rate compared to Class A buildings. They are more available and provide more resources to fit specific needs for many companies, though offset with less accessibility, and potentially higher utility costs. However, this still makes Class B a strong contender for those less concerned with prestige versus functionality and cost.
Class C Buildings
Class C buildings are the oldest buildings, and the ones in the less desirable locations. They still meet the usability needs of many businesses, and at much more affordable rental terms, but they come with several drawbacks. These tend to be the least maintained, and often will require maintenance or renovation. Key systems may lose functionality and require immediate repair. These buildings tend to have few if any amenities, making items like on-site parking and security difficult to find in Class C buildings.
While at the lowest grade, Class C buildings still occupy an important place within the real estate hierarchy. They provide spaces for companies with little rental history, lower credit, or in need of short lease terms. And while the amenities and features are less modern, these buildings typically provide more customization and build-out opportunities as landlords offer higher levels of flexibility to entice potential tenants.
Choosing which class of building best fits a business is about aligning expectations, goals, and needs with price, location, and modernization. It’s a careful balancing act that requires keeping track of many moving parts at once. With such important decisions pulling attention during the relocation effort, it’s important to remember that there are professionals able and willing to help out. The team of commercial tenant representative brokers at Integrated Real Estate Solutions looks at commercial real estate opportunities and solutions that make sense at all levels for our clients. Leverage our experience and expertise by talking to us about your company’s plans and vision, and allow us to guide and support your relocation efforts as you find the perfect fit for your business.
Integrated Real Estate Solutions, Inc. provides clients with the in-depth knowledge and experience that is critical to determine the right path to your next move, lease renewal, or strategic re-positioning of your real estate portfolio. Contact us or call 847.550.0160 today about your needs, and put our success to work for you.