The class of an office building is defined by the building’s characteristics. Let’s discuss that is further detail.
Class A Buildings
To categorize a structure as a Class A building, it should be brand-new or, at minimum, have been integrated this current building cycle. It’s all the bells and whistles that the very best buildings in town include. It’s typically downtown, usually a high-rise, and it has no functional obsolescence. On top of that features, it’s the greatest rent tier. Currently in Orlando, Class A buildings are between $25 and $30 a square foot, while Class B buildings are between $18 and $23 a square foot. Notice the gap of a few dollars between those two tiers – that’s typical in your community, too. You understand the class of a building instantly by the rent per square foot as compared to other building rents.
Class B Buildings
Class B buildings usually are over eight years old or older, depending on your own neighborhood. If the present building cycle you’re in is 3 to 4 years old, a five or six-year-old building could be Class B. Essentially, it’s not the age of the building that’s so important, because buildings don’t age quickly. Oahu is the systems within these buildings.
If it is a five-foot hallway rather than six feet, that is a Class B building. People will feel this way about it, because nobody built six-foot hallways until fairly recently hongtower. Now, if these were like hospital corridors with that extra one linear foot, it really feels so much more luxurious.
Class C Buildings
In Orlando, a Class C building will be more than 17 to 20 years old. This is a good example, and understand that drops in class will soon be different on the basis of the building cycles in YOUR area. This is vital to understand when trying to define the class of an office building.
A Class C building might have additional and certainly more functional obsolescence than a Class B building. Functional obsolescence is likewise found in areas just like the hallways, where you would have 4 feet or less of hallway. If you have a building with 3- 4 foot hallways, you’re feeling closed in, since you are very used to the newer buildings having five and even six foot hallways.
If no buildings over the last building cycle were integrated your town with six feet hallways and you walked in to a building like that, you would be surprised at the impact that it has on the visitor. It doesn’t cost the builders much to achieve that, but it lends an upscale feeling to the building.
Class C buildings are older, with lots of functional obsolescence and with systems starting to wear out. Maintenance on a Class C building costs a great deal more than the other two categories.
Once the restrooms are between floors, it is a hard thing to correct because you have to increase or down half a flight of stairs to obtain there, typically by using the fire stairs. Not just is that not ADA compatible, but it’s inconvenient and outdated. That one functional obsolescence immediately marks the building as Class C.
You could own some buildings you will have to classify as Class C buildings, if you should be going by their age. However, they may still command high Class B-rate rents. This difference just depends on what you maintain your property. Right now, if you buy a Class A building in Orlando, Florida, you would pay the same of a 6% “Cap Rate”- in other words, you should not get one because there’s more bang for your buck as of this writing in older buildings.
It’s no economically sound investment. However, you certainly can do fairly well with a Class B building. If you buy it on a 9% “Cap Rate”, the investment will likely produce cash flow for a considerable period of time.
Tip: Office buildings last for decades and more, especially if they are built correctly. Therefore, the biggest bang for your buck is from the Class B building, as it will soon be that class for a long time if it’s well-maintained.
Remember that the class of an office building is defined by its characteristics and not only by when it had been built. I am hoping these records will allow you to broaden your knowledge on the best way to define the class of an office building.