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Class A Buildings vs. Class B Buildings – Office and Industrial

June 27, 2018

Class A buildings vs. B buildings is hard to define, and harder to price. General rule, Class A is new or just renovated, master planned covering all systems and buildout meets codes that are up to date. You will be the first tenant in this new space.

Class B buildings are more difficult to uncover the deficiencies. Generally, structures are one generation older, slightly inferior, passed through several tenants, with systems that need attention with warranties set to expire, and there may be a need to check the latest building codes if there is a plan to add tenant improvements or additional office space. Otherwise, the building is functional for the intended use.

For Class B, look for a price drop off from Class A of ~15%. If you find the drop less than ~15% then Class B is priced too high in the market and negotiating is the way to adjust. Or better yet, simply get that Class A alternative because after all maintaining the building is a cost that tenants cover in most leases.

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