[Webinar] A Guide to Office Building Classifications
Whether you’re just getting started in the commercial real estate space, or you’ve already begun investing, it can be difficult to know what to look for. Thankfully, there are classifications that narrow down your search immensely and will help you find the perfect investment opportunity.
Office building classifications are pretty straightforward and are either labeled as class A, B, or C. Each of these classes vary among markets and are labeled comparative to other surrounding buildings, so it’s important to thoroughly research the area the building is located in.
Here’s a brief overview of each that can act as a general guide to office building classifications:
Class A buildings are the best of the best; they’re the newest developments and the nicest spaces on the market. These buildings are typically found in high-end, premium downtown areas. You can find everything from gyms to cafés to on-site parking – many amenities beyond just the office space itself. Because Class A buildings are well-located and are overall top-tier spaces in the market, they have the highest rent and attract high-quality tenants.
A few examples in the Nashville area would be:
- The Pinnacle at Symphony Place
- The Bridgestone Tower – Corporate HQ
Class B is ranked below Class A. These buildings are a little more outdated and aren’t as visually appealing, but still have excellent management and tenants. They are often found in business centers or business parks, outside of the downtown metro area. It’s important to note that there are many Class B buildings in downtown areas, as well, but they tend to be a bit older than Class A. At one point they may have fallen under the Class A category, but over time, they have naturally been outmatched by other brand new buildings.
Class B buildings can be attractive to some investors because of the opportunity to upgrade amenities and restore various features that can bump them back up to Class A.
Class C buildings require the most renovation and work. They’re located in less desirable areas, have little to no amenities and are much more outdated than Class B. I’m sure you’re wondering, then why would anyone invest in Class C spaces? For a few investors, they may be drawn to the opportunity to re-develop or completely renovate the building and see it as a value-add project; however, the location may still remain a barrier to finding tenants.
Now that you have a better understanding of each classification, it’s evident that acquisition costs, desired rate of return and risk tolerance all play a large role in which class is the right investment for you.
If you have any questions or would like to speak to someone on our team, please don’t hesitate to reach out!
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