The ABC’s of Commercial Real Estate
When browsing through the commercial real estate listings on sites such as the Atlanta Business Chronicle or CoStar, tenants will find that office buildings are often classified as being a Class A, Class B, Class C or “Trophy” building. Building classifications assist in setting general characteristics for category, but unlike the LEED certification detailed in a prior blog post, there is no specific checklist for classifying an office building. Classifications in commercial real estate are truly “in the eye of the beholder.”
Here’s a breakdown of classification standards in the Atlanta area market:
“Luxury” is a common denominator for buildings in this category. Most are recently-constructed towers built to the highest standards in the office marketplace. The infrastructure and design aesthetics are top quality. The amenities reflect the building’s prime location with covered parking, perhaps a café, and with access to shopping and hotels. Fitness and daycare facilities are often found in a Class A building. Even the restroom fixtures are deluxe—automatic faucets and soap dispensers are common. The prime location of Class A buildings and accessibility to amenities attract high-quality tenants and the highest rents.
Because of its high-end amenities, the Concourse is considered a Class A building.
Buildings in this category are generally older than Class A buildings, but may still offer a quality office environment in a desirable location. The infrastructure in Class B buildings is generally still solid, and even though the building may not offer the amount and variety of amenities, it may provide perks such as a coffee shop or covered parking. Fixtures and building décor may be “dated.” Class B buildings rent at a lower rate than Class A buildings, and attract tenants who put an emphasis on value but still want to make certain amenities available to their employees and clients.
This Class B building is located in Buckhead Centre.
Class C buildings are generally older than Class B buildings, may not be convenient to major transportation, and don’t offer the prized location of a Class A or B building. The architecture and infrastructure is sharply outdated, and may even be in need of renovation. The amenities are usually sparse: covered parking, coffee shops and automatic faucets are not offered in Class C office buildings. What a Class C building does offer is a low rental rate that may appeal to tenants who are not looking for variety and luxury, but instead seek a bare-bones office environment.
Clarkston Professional Building
The most architecturally significant office buildings in the market are usually referred to as “trophy” buildings. Trophy buildings are brand new, high-rise structures that offer state-of-the-art functionality and design across the board. From their infrastructure to their fixtures, their quality is unsurpassed. They offer peerless amenities with stylish restaurants, shops and access to luxurious hotels. Because of their status and significance in the market, Trophy buildings are desirable to competitive companies that are willing to pay the highest rents in the marketplace to vie for top-notch talent or high-end clients. These companies view rental expense in Trophy buildings as an investment in their success and necessity to attract the right clientele.
The building at 3630 Peachtree Street features state-of-the-art design typical of Trophy buildings.
So how does a tenant decide on the building classification that’s best for their business? It is important that buildings be viewed in context to each tenant’s specific needs and financial considerations. An experienced tenant advisor with thorough market knowledge is the key to negotiating the variables in commercial real estate offerings at all classification levels.
Blog contributed by Jason Jones, Principal at Cresa Atlanta
All photographs are courtesy of CoStar
Cresa Atlanta is the largest tenant representation firm in North America. Learn more about our dedication to service by reading The Tenant’s Bill of Rights.
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