The classification of office buildings can be confusing, especially for those who are new to commercial real estate transactions. As a baseline matter, office buildings are categorized broadly into one of three classes: A, B or C. This classification structure, which corresponds roughly to a descending scale of price and overall desirability, is used in Pennsylvania and throughout the rest of the country.

However, there are often substantial variations in how these classifications are applied from one person or company to the next. This can create obstacles to communication and negotiation between buyers and sellers, or between property owners and potential tenants. Therefore, it is helpful for anyone in the commercial real estate market to familiarize themselves with the considerations that come into play when classifying an office building.

Class definitions

In basic terms, office buildings are classified according to the following structure:

  • Class A: These are high-end, prestigious office buildings with numerous amenities, such as underground parking, on-site shopping or dining, and high-end landscaping. Class A office buildings are typically found in highly accessible locations such as downtown areas or newer first-ring suburban developments, and generally have higher-than-average rents.
  • Class B: These are usually somewhat older office buildings with fewer amenities than those in Class A. They may be in need of updates but are typically fair to good in comparison to other buildings in the area, with rents in the average range for a given location.
  • Class C: These are basic "no-frills" buildings with limited amenities. Class C office buildings are often located in the suburbs or on the outskirts of downtown or warehouse areas, and typically have relatively low rents.

Other considerations

As is evident from these descriptions, the way an office building is classified depends in part on its location and how it compares to other office buildings in the vicinity. Thus, a building that is considered Class A in downtown Wilkes-Barre may be viewed as Class B were it located in Manhattan, where there is likely to be a higher density of high-end office buildings competing for the same tenants.

Another related factor is the tenants themselves, which in some cases can affect the status of a building as well as how it is classified. The presence of a well-known, successful company such as Comcast or General Electric, for instance, may create a major draw to other companies that wish to improve their own reputations by association. Similarly, because certain types of businesses tend to gravitate toward one another - such as banks, technology firms and retail stores - the presence of a certain type of tenant in an office building may increase its appeal to others in the same industry.

For anyone contemplating a commercial real estate transaction, whether as a buyer, seller, tenant or landlord, it is wise to seek advice from a knowledgeable real estate attorney. He or she can assist clients in the negotiation process and help to further their interests in any agreement that is reached.