Why You Should Invest in a Class-A Facility
When looking for the ideal facility or office space, investors and tenants generally want the looks, the location, and the functionality. This is reasonable and to be expected, however, when it comes to the best, you will also notice the price tag that runs along with it. Why should you invest in a Class-A facility? In the long term, Class A structures are the way to go but to help provide future investors and tenants with a better understanding of the different classifications in medical, office, or multi-use buildings, we’ve broken them down and laid out the pros and cons.
Class A buildings are the “crème de la crème” of commercial buildings constructed with fireproof structural steel frames, high-end tenant improvements, and high-quality, first-class finishes. This structure would provide your group with state-of-the-art technological capabilities, plumbing, elevator, and HVAC systems. High-end amenities would also be equipped such as wide-open lobbies, glamorous atriums, and tons of natural light running through and throughout. You will have exceptional accessibility and a high parking ratio. Property management for these structures is also held to a premier standard. This means these structures are safe, clean, and maintained to the highest standard, regardless of demographics.
- For investors | Class A buildings are the newest buildings on the market in the best condition. This would attract the best tenants with stronger lease teams and have the highest rents. It is the least risky investment with the most stable cash flow.
- For tenants | Class A office buildings or spaces would be the best to rent. These structures look the best and are designed to produce a higher level of productivity and accessibility. With newer systems and newer technologies, you would have access to lower energy costs due to their efficiency.
- For investors | you will need to stay on top of trends and upkeep, and that may incur additional costs.
- For tenants | these office spaces would occupy the highest price range in the area.
Class B buildings would be considered the “runner-up” in commercial buildings mainly because of their age. They typically range between 10 and 20 years old, however, they still entail a solid structure and good quality management. Class B buildings are fire-resistant with reinforced concrete columns and beams. Floors and roofs are formed or precast concrete slabs. Technology is adequate. HVAC and elevator systems are functional but not state-of-the-art, hence the drop in class.
- For investors | Class B buildings would cater to a wider range of tenants. In addition, these buildings provide an opportunity to improve to Class A standards with enough renovations.
- For tenants | Class B office buildings or spaces would be the most economical offices to rent without the “wow” factor, but better than Class C.
- For investors | the location may not be as centralized and the return on investment is smaller compared to a Class A building.
- For tenants | these spaces might compromise on-site parking availability and amenities. While HVAC and elevator systems are functional, they are not top-of-the-line and you may incur higher utility costs.
Class C buildings are the lowest classification among the three categories. These structures would typically be older buildings dating 20+ years with masonry or concrete exterior walls. Floors wood or concrete plank on wood or steel floor joists, or concrete slab on grade. Roofs would entail wood or steel joists with wood or steel deck. Class C buildings need substantial renovation improvements, have outdated systems, have no routine upkeep, and entail little to no parking. In the end, Class C buildings provide a functional space and would serve small businesses with a home base in the office but operate on the field well.
- For investors | Class C buildings would be a considerable target for re-development projects.
- For tenants | Class C office buildings or spaces would offer below-market rents.
- For investors | Class C buildings would be hard to compete with higher-quality office spaces. With that, they take the longest time to lease to tenants.
- For tenants | Class C office spaces are often located in the least desirable areas with dated finishes and need for repairs.
A building’s classification matters because it can provide a potential investor or tenant with a substantial amount of information to help understand the risk, return, and determine if this next move is the right one.
As firm believers in the investment of Class A facilities for our tenants, we ensure our projects are built to the highest standard and exercise Evidence-Based Design or “EBD” throughout all the phases of the development to create better buildings for Healthcare. If you’re looking to find out more about our process, services, or available properties, contact us below.