When you're exploring your options for commercial office space in a given area, you'll find that various listings are marked with letter designations. Understanding the differences between Class A, B, and C buildings will help you focus on the options that will be the right fit for your budget and your company. Read on to learn more about each class of building and its benefits and drawbacks.
Class A Buildings
A building marked with a Class A designation is one of the highest quality locations in the area. Typically, buildings with this designation will have been constructed within the last 15 years or have been recently renovated.
Pros for Tenants:
With a Class A building, maintenance and repair issues should be minimal, reducing hassles and helping to stabilize Common Area Maintenance (CAM) costs. High-earning, prestigious businesses will be your neighbors, and in many cases, buildings in this class have a positive reputation in their communities. Class A buildings are generally more energy efficient and may have green features that can minimize utility costs. For the most part, Class A buildings are professionally managed, meaning you can be certain that any concerns you have will be quickly addressed.
Cons for Tenants:
As you might expect with so many benefits, Class A buildings will have the highest rental rates in the area.
Class B Buildings
Class B buildings are older than Class A buildings but are usually still in good condition and have professional property management.
Pros for Tenants:
Despite their age, Class B buildings are still functionally sound and are not likely to have major unexpected repair and maintenance issues. Because the buildings are older, rental rates will be more reasonable, making Class B options ideal for small businesses. Professional management ensures that you can expect the same responsiveness you would in a Class A building.
Cons for Tenants:
With Class B buildings, you will miss out on having a prestigious address for your company. CAM fees and utility costs are likely to be higher, as these buildings are usually less efficient and will need more routine maintenance.
Class C Buildings
Class C buildings are the oldest in a geographic area. These buildings may or may not be professionally managed.
Pros for Tenants:
Class C buildings will have the lowest rental rates in the area. Because they are less popular, they are more likely to have space available in cities where commercial real estate is in high demand. As a result, you may have more negotiating power and be able to receive favorable lease terms, money for tenant improvements and other perks. This is particularly true if you are willing to sign a long-term lease.
Cons for Tenants:
Due to their age and condition, Class C buildings are much more likely to require maintenance and repairs, meaning your CAM costs will be higher. If the building is not professionally managed, you may find it difficult to have concerns addressed. As HVAC systems are typically older, the buildings are less efficient, resulting in higher utility costs.
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