The 3 Classes of Office Buildings
If you are considering investing in an office building, you will probably be looking at buildings that will fit into one of three classes. Office buildings are typically assigned to one of the classes due to their quality rating which is dependent on the property characteristics and the local market’s definition of the class levels. While every market has a different definition of the classes, they typically fall somewhere along these classes.
Class A buildings are of the highest standard for investors and tenants. These buildings are typically located in high visibility address areas and tend to have a higher quality of design and amenities. They are ideal for those investors that are core strategy oriented such as investing in pension funds, core focused REIT, or looking for low standard deviation oriented investments.
Class B building are typically older and have less focus on design. However, they are solid building for their use. The rent tends to be lower in these buildings and the variety of tenants results in lower credit quality. These buildings are best for investors looking for gamma strategy oriented value add such as private equity groups, turn around investors, or higher return seeking family offices.
Class C buildings are typically the oldest buildings of the three classes and are located in less desirable locations. These buildings often have a lower level of tenants and are less desirable buildings. They are the right choice for investors that are opportunistic and seek to complete alpha strategies to improve their building from class C to class B.
Office buildings have the potential to be a good investment if the investor is looking to invest in the right property. Most office buildings are categorized into one of three categories depending on the quality of the building and the area where the building is located. If you are looking for a commercial real estate investment, come see the professionals at Harkins Commercial Real Estate.
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