My 'B,' May Be Your 'A!'
In our last post we talked about the types of commercial property available for sale and lease in the Triangle. Perhaps the most popular type for businesses, investors and owner operators are Office buildings, condominiums and units. Office properties can vary in amenities, structural design and condition and as a result they are traditionally classified as A, B, or C. This categorization is generally classified in relation to their local counterparts. But classification standards can vary by markets and as an agent or buyer you may see some classifications that do not follow the below guidelines…the classifications are subjective at best!
But if you apply the following Metropolitan guidelines, you should have no issues making your own decision on a particular property's classification.
These buildings represent the newest and highest quality buildings in their market. They are generally the nicest looking, best constructed buildings, and possess high-quality building infrastructure. Class A buildings also are well located, have good access, and are professionally managed. As a result of this, they attract the highest quality tenants and also command the highest rents.
These buildings are generally a little older, but still have good quality management and tenants. Class B buildings are well located and can be returned to their Class A glory through renovations such as facade and common area improvements. Class B buildings are well maintained and have modern amenities.
The lowest classification is Class C. These are older buildings and are located in less desirable areas and are often in need of some TLC! Architecturally, they may be outdated, and the building infrastructure and technology will be in need of upgrading. As a result, Class C buildings have the lowest rental rates, take the longest time to lease, and are often targeted as re-development opportunities.
Since office classifications are predominantly subjective, they should not be held as the only defining factor in evaluating a property. Business owners and investors should find a property that matches their need and not what matches a letter grade. Remember, one person’s A maybe someone else’s B+!
Graphics Source: Raleigh-Durham Office Market Report 3Q 2019. Avison Young