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
- 5 Examples of Class B Office Spaces
- 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 Hartman offers have beautiful modern interiors and exteriors, as well as on-site management.
Gateway Tower in Dallas, Texas is an example of a Class B building with class A features.
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.
WATCH: What do Class B space need to compete with Class A?
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
5 Examples of Class B Office Spaces
Hartman’s portfolio of commercial spaces is made up of mostly Class B buildings and a select few Class A properties. As you will see in the examples from our portfolio below, Class B properties can be extremely desirable, functional and cost-effective for owners of small and mid–sized businesses
Ashford Crossing II may be a Class B office space in name, but in features, it is more along the lines of Class A. It’s a six-story building with convenient access to freeways, hotels and fine dining in Houston’s Energy Corridor. It comes with on-site property management, garage parking, 24-hour surveillance and an on-site courtesy officer.
Our Class B property at 11211 Katy Freeway has recently had around $1 million in improvements to common areas, and it’s only three miles from Houston’s well-known City Centre. A new HVAC system, on-site management, renovated covered parking and Bi-Polar Ionization air filtrationsystem are just a few of the Class A features in this Class B-priced building.
Corporate Park Place is a top tier Class B property in DFW. It is only minutes away from some of Las Colinas’ most popular high-end retail, entertainment, and sensational food establishments. Corporate Park Place boasts an aesthetically pleasing exterior and equally distinctive interior with abundant natural light. Tenants in this property enjoy A class amenities like its recently renovated atrium, lobby, and common areas, Foodsby catering, an on-site day porter, covered parking and a soon-to-open grab & go snack market, just to name a few.
At 15 stories, Gateway Tower in Dallas doesn’t look like a Class B office space at first glance. The building is centrally located, with easy access to Love Field and the Dallas Fort Worth International Airport. On site, you will find a day porter, courtesy officer, building engineer and professional management, as well as garage parking and stunning views of North Dallas.
The 19-story Three Forest Plaza occupies a central place in the Dallas-Fort Worth metroplex, and it comes with a long list of amenities typically reserved for Class A office buildings: a fitness center, courtesy officer, deli, parking garage and a 40-person conference facility.
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.
Looking for Class B prices with Class A amenities? At Hartman, that’s our specialty. Contact us to learn more.
About the author:
Sarah Hoopes is the Marketing Coordinator at Hartman Income REIT. She is a graduate of Utah Valley University with a Bachelor’s degree in Marketing and Business Management.