The Difference Between Class A & B Buildings
When you’re looking for commercial office space, you have to make numerous decisions. You need to know where you’re looking, what your budget is, how much space you need and which features and amenities you require. But there’s one more decision to make: Do you want a Class A building or Class B building?
The distinction between Class A and Class B office space, as well as Class C buildings, can be kind of difficult to grasp. But these are a few commercial real estate leasing terms you will want to take the time to understand. That’s because understanding the building classification you need can help you find the perfect commercial space.
Building classes can be summed up with two words: “They’re Subjective.” This does not bar the fact that they must be categorized for brokers, investors, and potential tenants alike.
Real estate brokers use these classifications to justify the cost of leases, concessions given, or required lease length within the building. Brokers will typically base classification on building age, HVAC systems, location, technological capacity, property management, finishes, tenancy, and amenities.
This guide will help you understand how building classification works and the differences between each class. Read on to learn more.
Covered in this article:
- The Difference Between Class A & B Buildings
- What is a Class A Building?
- 5 Common Features of Class A Buildings
- What is a Class B Building?
- 5 Common Features of Class B Buildings
- The Case for Class B Buildings
What is a Class A Building?
Building classifications go in order, with Class A buildings being typically known to be the newest, highest quality, and with a larger number of amenities. Class A buildings can be considered the “crème of the crop” for their markets.
What, exactly, makes a particular building attractive under these standards? Class A buildings will almost certainly have high-end finishes, HVAC, amenities, and technologies. These buildings could be a staple of its city’s skyline and tower over surrounding buildings. Class A office spaces are located right where the action is in the business centers and are highly sought after because of this. Factors like very large size, aesthetically pleasing exteriors and interiors, the age of the building and sharing the space with strong co-tenants tend to make up the bulk of the difference.
Class A office space — sometimes called a “Grade A” office space — will typically command a higher rent than a Class B office space and a much higher rent than a Class C building. For that reason, Class A buildings are usually only an option for a very select number of companies.
Keep in mind, however, that Class A buildings don’t always come with grade A service. In fact, because the operating costs tend to be higher in Class A office buildings, landlords have been known to try to recoup the costs through inflated utility and operating cost clauses in rental contracts. Read any Class A lease carefully before you sign it.
If that makes you nervous, that’s understandable. The good news is that you can often find Class A features in Class B buildings. For example, many Class B buildings have beautiful modern interiors and exteriors, as well as on-site management.
5 Common Features of Class A Buildings
- Aesthetically pleasing exteriors and interiors
- Top-of-the-line fixtures and finishes
- High-rise buildings
- On-site building management
- Gyms, saunas and food courts
What is a Class B Building?
Class B buildings are a small step down in quality from Class A, but the differences in quality often center on features that are about aesthetics rather than essential functionality. That’s why smart business owners looking for high quality and reasonable prices often find themselves gravitating toward Class B office buildings.
While the difference in quality between Class A and Class B office space is minimal, the difference in price can be astounding. And saving on monthly lease costs can come in handy in a big way when the economy is uncertain. With less to pay in rent each month — but all the functionality necessary to run your business — you can weather the economic storms better.
5 Common Features of Class B Buildings
- Meeting rooms and common areas
- Older but well-maintained buildings
- Typically fewer than 10 stories tall
- Available on-site parking options, but may not always be covered or abundant
- Found in nice but less prestigious parts of town
The Case for Class B Buildings
Business owners want the best, but when it comes to Class A buildings and Class B buildings, Grade A doesn’t always win the day. That’s because massive Class A properties simply can’t make sense for many small businesses that need to prioritize price, location and flexibility in lease terms simultaneously. Class B buildings provide quality where it counts and satisfy the modern requirements of many small and mid-sized businesses.
For example, sustainable and environmentally friendly buildings are becoming much more attractive to both businesses and employees, and Class B buildings tend to have an easier time gaining green certifications than their enormous Class A counterparts.
Meanwhile, the pandemic and the accompanying rise of remote-friendly work arrangements has afforded businesses the flexibility to have less office space. If some employees are working at home on any given day, you don’t need as much desk and conference space in the office. That makes Class B office spaces — and their lower prices — even more attractive.
Similarly, remote work and various other factors have led to many people abandoning larger cities in favor of more suburban areas. And suburban areas are much more likely to have Class B buildings than Class A buildings.