Class A, B, C real estate?
March 29, 2013 9:59 PM   Subscribe

Real estate filter: Is it considered in any way derogatory or impolite to refer to non-prime commercial office space as "Class B" or "Class C"?

My question is: I am contracting for a firm that is exploring the costs of running underground fiber-optic cable to unserved buildings in a major north american city. These buildings currently have some form of Internet access via ADSL2+, multiple T1s, or occasionally DOCSIS2 where the local cable TV company also happens to have service into the building.

Pretty much all of the "Class A" premium office towers in the city in question have had fiber for 8 to 10 years. We are going after exclusively what seems to be defined as "class B / C" buildings.

In discussions with commercial realtors and property managers, are the following grading systems really applicable? Is it rude or inconsiderate to accidentally refer to a building as "Class C" when the owners may actually think it is a "B"? To me it seems like a weird classification system, and certainly if referring to a manufactured product or other thing as "grade B" or "grade C" it is describing something that is noticeably substandard... For example an eBay "cosmetic grade C" refurbished laptop that is covered in scratches. Or a "B-grade" movie.

for reference:

link one.

link two.

link three.

Quoting wikipedia:

The Building Owners and Managers Association (BOMA) classifies office space into three categories: Class A, Class B, and Class C.[4] According to BOMA, Class A office buildings have the "most prestigious buildings competing for premier office users with rents above average for the area." BOMA states that Class A facilities have "high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence." BOMA describes Class B office buildings as those that compete "for a wide range of users with rents in the average range for the area." BOMA states that Class B buildings have "adequate systems" and finishes that "are fair to good for the area," but that the buildings do not compete with Class A buildings for the same prices. According to BOMA Class C buildings are aimed towards "tenants requiring functional space at rents below the average for the area."[5] The lack of specifics allows considerable room for "fudging" the boundaries of the categories.
posted by thewalrus to Work & Money (6 answers total) 2 users marked this as a favorite
In what context would you actually describe the class of a particular building to the property manager?

It seems like you have an internal classification scheme that is similar, but not identical to, the standard commercial real estate grading scheme. Why not just continue to keep your scheme private when talking to prospective customers?

That said, in my limited experience, agents are much more likely to have thin skin (or act like it, for their strategic benefit) than property managers. If the property manager has been told that their property is "B" grade, then they will probably continue to parrot it. If you call it "C" grade, it probably won't offend them, but they may correct you. But what does the grading of their property have to do with your discussions? Isn't the critical issue whether they have fiber yet?
posted by b1tr0t at 10:23 PM on March 29, 2013

[I'm not at all a real-estate guy, but have had numerous opportunities to get to know the property management people due to similar telecom-related issues. They seem to be no-nonsense type people, for the most part]
posted by b1tr0t at 10:24 PM on March 29, 2013

I think that property managers are generally practical people who have an idea of where their building is relative to the competition. That said, I'm not sure what calling someone's building "Class B" to their face would accomplish. Why wouldn't you call it "underserved buildings" or something of the sort?

The challenge you face is that class B/C buildings are competing more on price than on services and finish (C especially). In general it seems to me like offering to sell Burger King real cheddar for their cheeseburgers; it would take them out of the price competition, and the people who want good hamburgers are already buying them from a different class of restaurant; to appeal to that market, BK would have to change most of what they do. That said, I can envision a market of tech and tech-related companies (my firm, for one) who are not particularly interested in shiny offices, but for whom good internet is key. Landlords in whatever part of town has the most tech type business may be a good first start.
posted by Homeboy Trouble at 10:49 PM on March 29, 2013

I am an economist who works a lot with commercial real estate firms - what I have learned is that class B and C definitions vary widely between firms and jurisdictions and is more of a soft science than a hard one. There is no one definition to go by - even the definition you have doesn't have hard boundaries to it.

That said, I'm not sure why this is involved in your pitch at all - you aren't a commercial real estate expert and whether a building is class B or C doesn't automatically mean anything to a building owner. You can target those building owners without them knowing why they were targeted - you provide X service which increases the amenities they can provide at cost increase/neutral/savings - providing them a competitive advantage against other similar offerings in the market. You don't need to say "other class B" offerings to make that point.
posted by Rodrigo Lamaitre at 6:07 AM on March 30, 2013 [1 favorite]

It's not particularly insulting in commercial brokerage, no. Not the way we would say "second-rate." But...

That being said, plenty of class B buildings (and some Cs) call themselves class A, when they are blatantly, clearly not. That is part of their (crappy) marketing. So it's easy to run afoul with developers and landlords. Best to avoid, as people here say.
posted by RJ Reynolds at 3:24 PM on March 30, 2013

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