Classes A, B, and C categorize commercial real estate buildings. With every market around the country being different, the class is determined in relation to other buildings in the area. For example, a Class A building in Northern Colorado could be considered a Class B building in a larger city market. 

The classification levels have pros and cons, and each one of the three classes presents a unique opportunity. 

Class A Buildings

As you might have guessed, Class A buildings are the top tier. They are generally very aesthetically pleasing and are the newest buildings in their area. Class A structures have premium construction and building materials, prime locations, impressive amenities, and robust building management. 

The above-mentioned characteristics mean that Class A buildings can demand the highest rent and retain quality tenants. Class A structures tend to sell quickly and above the average price point of their given market. 

Class B Buildings

Class B buildings are average overall. These structures are reasonably attractive, moderately well-located, and slightly older than their Class A counterparts. Class B buildings still function well and have decent management and tenants. 

Investors tend to be attracted to Class B options as buildings can often return to Class A status with renovations. Class B buildings command fairly good rental rates and sell at fair prices. 

Class C Buildings

Class C buildings are the bottom category. They tend to be outdated (aesthetically and internally), much older, and located in undesirable areas. 

Some will approach Class B buildings as an investment opportunity, but typically for redevelopment purposes rather than simple renovations. Class C buildings have the lowest rental rates and are slow to lease and sell. 

How is Your Building Classified?

We would love to discuss any questions you have about the classification of your current buildings or any other properties in your market! Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Commercial real estate, like many other industries, has its own vocabulary. Many people know the more common terms, such as tenant and landlord. There are, however, less common terms that you need to understand if you are considering investing in commercial real estate. 

Important Commercial Real Estate Terms

Here are 11 important commercial real estate terms to know:

• Net Operating Income: Net operating income is the total rental income minus operating expenses.
• Capitalization Rate: The capitalization rate, or “cap rate,” is the net operating income divided by the cost of the building to show a rate of return. 
• Return on Investment: Return on investment (ROI) is the profit earned divided by the cost of ownership. 
• Rentable Square Footage: Rentable square footage (RSF) is the amount of space in a building that can be rented to a tenant and is a significant factor in determining the rental rate.
• Triple-Net Lease: A triple-net lease requires the tenant to pay all expenses associated with the building, including taxes, insurance, and maintenance. 
• Full-Service Lease: Full-service leases require the tenant to pay a base rent while the landlord covers operating costs. 
• Modified Gross Lease: A modified gross lease requires the tenant to pay a base rent and split the operating expenses with the landlord. 
• Sublease: A sublease occurs when the current tenant leases a portion of their space to a subtenant. 
• Vacancy Rate: Vacancy Rate is the amount of vacant space divided by the total space in the building. 
• Real Estate Broker: A real estate broker or agent represents a buyer or seller through a real estate transaction. 
• Property Manager: A property manager is in charge of operations, answering tenant questions, and arranging necessary repairs. 

Don’t Get Intimidated; Find a Partner

While commercial real estate and the associated vocabulary can seem intimidating, you just need to find the right real estate partner. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

Like, Share & Follow us on LinkedIn and Facebook.

#longmontcommercialrealestate #commercialrealestatebroker #northerncoloradocommercialrealestate