When it comes to quality, safety and efficiency, office buildings can often be found under different classification types. Typically, all office buildings fall into one of three classes or grades. Grade A, Grade B or Grade C. Standards often vary by market and city. Each category is defined in relation to its counterpart, so developers, investors and prospective buyers / tenants can all identify and determine each building accordingly.
Classification allows for the differentiation between buildings, which makes it easier to rationalise market data. i.e asking and transacted rent & sales price. Such data is critical in assessing the right decisions when it comes to buying or leasing the the right asset, whether it’s for individual or corporate usage. There are several factors to take into account and classification may not be an exact science. However, there are general characteristics of each class that are easily identifiable. Here are a few of them.
As the name suggests, this class is reserved for the highest quality buildings in a market. For the most part, Grade A buildings feature the best aesthetics and being constructed with the best specifications with top-grade building infrastructures.
Besides having the most important criteria of a prestigious address, the most common specifications of a Grade A office building will be a floor plate of a minimum of 20,000 sft, full floor to ceiling height, lift lobby with intelligent access, raised flooring. fibre optic ready etc.
Furthermore, Class A buildings must be strategically located with great accessibility right in centre of CBD. Building management also has to be exceptional. In fact, a Class A+ exists for buildings who go above and beyond expectations with regards to quality, maintenance and management. As a result of all these factors, a grade A office building often attract the highest quality tenants while also commanding the highest rates. A Grade A building often attract tenants of the highest calibre, such as Multi National Corporations, Techological unicorns, banking instituitions.
As far as office spaces are concerned, Grade B developments are often considered to be of decent quality and build. They may not have the same high-quality fixtures, components, architectural details or impressive lobbies seen in Class A spaces. However, developments in Grade B are still very good and fully functional in terms of structure and layout.
Other factors, such as location, building systems, property managers and facilities are usually ranked average to above average on the quality scale. A majority of Grade B buildings are often built in suburban areas or on the edge of prominent financial districts.Grade B office spaces tend to command “average” market rent (which might make it one of the more common class types for SMEs).
There is a final factor that differentiates Grade A and B buildings; that is age. Since Grade B buildings are typically older than Grade A buildings, some developments experience slight deterioration. In fact, buildings can start out as Grade A and downgrade to Grade B after a decade or so once the signs of wear-and-tear become clearly visible.
Grade B buildings are still very much in demand and sought after as not all businesses require to be in Grade A buildings. There are also a large number of Grade B buildings having the same prestigious business address as Grade A buildings in CBD as well.
The Grade C category is often used for office buildings that are older (around the 20-year mark). These buildings may also be located in less prominent or desirable areas, which contributes to its classification, and they are usually in need of extensive renovation in order to restore some semblance of aesthetics. Grade C offices are also in less desirable buildings featuring older or no technological features.
Grade C properties that continue to remain occupied, command lower rental rates and generally attract tenants with smaller business operations. These tenants tend to either not have the budget to afford bigger, more impressive spaces or do not require access to centralised CBD hubs. Such businesses generally also do not require an impressive building or address , unlike Grade A office tenants.
It can be possible for Grade C buildings to be upgraded to Grade B buildings , with Asset Enhancement Initiatives (AEI ), major improvements and repairs. However, it’s unlikely that they will ever achieve Grade A status, mostly due to the location and visible age of the building.
So, these are the classification types that buildings fall into. Bear in mind that these are general guidelines and no formal international standard exists for the classification of buildings. In reality, a number of factors are taken into account before buildings and office spaces are chosen (from the amenities offered to the location and market condition). Because of this, classification can be somewhat subjective. However, the overall quality of the space is something that you should bear in mind while reviewing lease negotiations.
In summary what decides an Office Space/ Building Classification?
Below are some factors that decides the actual building grade :
• Property age
• Floor Plate size
• Number and speed of elevators
• Lobby access system
• Construction certification i.e Green Mark
• Onsite amenities / facilities
. Links to public transport network / Train stations.
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