An office space is a reflection of a company’s ethos and is integral to its growth and development. Moreover, the right office space also has a significant impact on the efficiency and output of employees. Considering these factors, companies are actively hunting for high-quality office spaces that project the right image and are also considered a prime business address.
Before a company chooses an appropriate office, it is important to understand how commercial spaces are graded and classified. The presence of a grading system gives companies a chance to distinguish between the available options and make a viable business decision. This grading system is also beneficial for commercial agents who use it to assess the capital values and rentals of office spaces. While the data and formula may differ for each market, the following are the three broad classes of commercial spaces:
These buildings are the best in the business and are mostly recent developments with top-of-the-line construction. Grade A buildings are usually located in the central business district and command high rentals. The maintenance and upkeep of these commercial spaces is undertaken by renowned property management companies that keep them in superior condition.
The buildings falling in the Grade A category are mostly brand new construction or they have undergone redevelopment and complete overhaul within 15 years. Some of the parameters used to identify a Grade A are central location, quality of facilities, architectural finesse, security, parking space and also recreational options in the vicinity.
The second rung of commercial buildings are classified as Grade B buildings that don’t boast of the fine construction, facilities and management of Grade A spaces. However, they are generally well-managed buildings with fully functional facilities and are often located in the suburbs or the peripheral business districts.
Due to their average appearance, facilities and location, Grade B office spaces tend to command average market rent. At times, these spaces may start out with a Grade A tag but are downgraded after a few years after the deterioration becomes visible. On the other hand, investors often turnaround Grade B spaces in good localities with some refurbishment to earn a Grade A rating.
The last classification of office space is Grade C and these buildings are often located in distant areas. These buildings are mostly 20 years or older and are in need for repair and renovation. Consequently, Grade C buildings have the lowest rent, take the longest time to lease, and are frequently considered as re-development opportunities.
These spaces are appropriate for small scale businesses that cannot afford Grade A & B rentals and may not need to work out of central areas. However, Grade C buildings offer rehabilitation opportunities to investors looking to upgrade the space to a higher category.
While grading of commercial spaces may be common for most markets, the standards may differ for each area. There is no formal standard for classifying a commercial space, however the broad categories mentioned above help a potential occupier in making the right choice.