A, B, or C – How can you classify something without a classification system?

I always appreciate unusual coincidences, like today, when I got off the phone after explaining to a client about the differences between Class A and Class B buildings in Chicago only to see a LinkedIn Answers question asking for clarification on the Class A/B/C system.  Since it was still fresh in my mind from the phone call, I decided to take a shot at answering the LinkedIn question.  Feeling that I had done a fairly decent job of addressing the question, I have decided to reproduce my answer for my readers (below).

The classification standard does vary between markets. When clients ask me what the difference is between Class A and Class B buildings in Chicago, I tell them that the four factors that generally affect classification are:

1) age and condition of the building
2) quality and availability of amenities
3) rental rate (often reflecting 1 and 2)
4) who you are speaking with.
Often, #4 has the biggest impact. Since a little puffing is acceptable in the real estate industry, sellers and leasing agents will generally give their properties a little boost in CoStar http://www.costar.com , LoopNet http://www.loopnet.com or other marketing materials. Tenant and buyer representatives, on the other hand, will often lean in the other direction, taking a more conservative classification for a given building. I am not aware of a formal standard or governing body for qualifying building class.

Regarding different markets, there is even greater challenge in comparing buildings. Rather than use Peoria and Manhattan [identified in the question on LinkedIn], take any two cities that you have visited (perhaps those two would work). Make sure that one is in the top 10 largest cities (e.g. New York, Chicago, San Francisco, LA, Dallas, Minneapolis/St. Paul) and that the other one is a much smaller city (e.g. Peoria, Rochester, Tulsa, Duluth, Cedar Rapids, etc.). There is generally a shift in building quality when moving from a Tier-1 city to a Tier-2 or Tier-3 city. Since classifying buildings is relative even within a single market, you can imagine that there is a greater ambiguity across markets. Generally you will not find any buildings in the Tier-2 or Tier-3 city with comparable quality to the top-of-the-line buildings in the Tier-1 city, but the smaller city will still have “Class A” buildings.

I was astonished not to hear of any formal system or regulating body that classifies these buildings.  Most people don’t even know that there’s actually a “Class F”, but that’s generally reserved for condemned or otherwise unoccupiable buildings [which doesn’t actually mean they are unoccupied].  With a little online “digging”, I did identify this Wikipedia entry, entitled Class A office space, but which elaborates on all three major class types.  I guess that if the system isn’t broken, there’s nothing to fix, but it would be nice to have more objective standards to categorize building types. 


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