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 must certanly be brand new or, at the very least, have been built-in this current building cycle. It’s all the bells and whistles that the most effective buildings in town include. It’s typically downtown, usually a high-rise, and it doesn’t have functional obsolescence. Best of all features, it’s the best 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 hongtower. Notice the gap of a couple of dollars between those two tiers – that’s typical in your community, too. You realize the class of a building instantly by the rent per square foot as compared to other building rents.
Class B Buildings
Class B buildings are usually over eight years old or older, depending on your neighborhood. If the present building cycle you’re in is 3 to 4 years old, a five or six-year-old building may be Class B. Essentially, it’s not age the building that’s so important, because buildings don’t age quickly. It’s the systems within these buildings.
If it’s a five-foot hallway as opposed to six feet, that is a Class B building. People will feel this way about this, because nobody built six-foot hallways until fairly recently. Now, if these were like hospital corridors with this extra one linear foot, it just feels much more luxurious.
Class C Buildings
In Orlando, a Class C building could be significantly more than 17 to 20 years old. This really is a good example, and remember that drops in class is likely to be different on the basis of the building cycles in YOUR area. This is very important to know when wanting to define the class of an office building.
A Class C building would have additional and certainly more functional obsolescence when compared to 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. When you yourself have a building with 3- 4 foot hallways, you are 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 built-in your town with six feet hallways and you walked into 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 accomplish this, however it lends an upscale feeling to the building.
Class C buildings are older, with lots of functional obsolescence and with systems just starting to wear out. Maintenance on a Class C building costs a whole lot more compared to other two categories.
Once the restrooms are between floors, it’s a hard thing to correct because you’ve to increase or down half a journey of stairs to obtain there, typically utilizing the fire stairs. Not only is that not ADA compatible, but it’s inconvenient and outdated. That one functional obsolescence immediately marks the building as Class C.
You might own some buildings you would have to classify as Class C buildings, if you are going by their age. However, they could still command high Class B-rate rents. This difference just depends on what you maintain your property. Today, if you buy a Class A building in Orlando, Florida, you would pay the same of a 6% “Cap Rate”- quite simply, you shouldn’t get one because there’s more bang for your buck around this writing in older buildings.
It’s not an economically sound investment. However, you can do fairly well with a Class B building. If you buy it on a 9% “Cap Rate”, the investment will in all probability produce cash flow for a substantial amount of time.
Tip: Office buildings last for decades and more, especially if they are built correctly. Therefore, the greatest bang for your buck is from the Class B building, as it is likely to be that class for quite a while if it’s well-maintained.
Bear in mind that the class of an office building is defined by its characteristics and not just by when it was built. I am hoping these details will help you broaden your knowledge on how best to define the class of an office building.