fbpx

Office Real Estate

Home » Commercial Rental Properties » Office Real Estate

While the work from home movement of 2021 has gained much traction, there is still strong demand for office space in both societal functions and as a profitable type of investment property. Historically office space was generally just finished shell space allowing for the tenant to fill with desks and furniture. However, recent changes in work culture has forced office property operators to focus on providing more tenant-retention amenities and even new subclasses such as “Coworking”.



What is Office Space?

When most people think of office real estate, they naturally envision tall square buildings that contain countless floors with people packed inside typing away on computers. While this may partially be true in some instances, office properties in modern times extend much further into creative spaces with various shapes and sizes that can encompass favorable amenities. Office space nowadays is made with the end-user in mind and aims to create welcoming and productive spaces that are accommodating to modern lifestyles.


Office Real Estate Definition

Land and buildings that provide a workplace and working environment for primarily administrative, technical, and professional services.


Types of Office Buildings

Office buildings come in various shapes, sizes and uses. Shapes can range from square boxes, to futuristic spheres.  Sizes can range from one-story, to hundreds of floors. Uses can range from administrative, to mixed-use with ground-level retail restaurants. Among the many types of differing characteristics, office properties are generally distinguished by Class, which include height, location, and use. Below we take a look at three most common Classes of office buildings:

Office Building Classes

Class A

At the top of the list for office buildings, Class A office buildings are considered to be the best in class for factors such as location, construction, and tenants. As the most prestigious building in its area, Class A offices seek premier tenants and command above average rental rates. Overall building upkeep and management is characterized as above-average.

Class B

The runner up for office space is Class B. These office buildings possess well-kept quality construction with limited amenities, but in a solid market location located just outside of central business districts. Although not as nice as Class A buildings, average rents for Class B are lower, but still above Class C. Overall building upkeep and management is characterized as average

Class C

Although last on the list, Class C office space holds a relevant position in the market. Conditions for these buildings generally are functional, but subtly dated in quality and located in secondary areas. Class C office space delivers functional space at below average rental rates. Overall building upkeep and management is characterized as below-average.


Office Building Locations

Central Business District

Central Business District (Commonly called CBD) refers to the commercial and business center of a city. In larger cities, it is often synonymous with the city’s financial district and geographically coincides with the “city center” or “downtown”. Office buildings located in a central business district are usually characterized by high-density development, being high-rise with 25+ floors with structured parking and multiple elevators. Tenants are usually large and national household names such as banks, law firms, and other types of professional service companies. Office buildings located in Central Business Districts often sell naming rights on the top of buildings (i.e. signage located on top of the building facade) for both branding and leasability purposes. Below is a list of pros and cons:

Pros

  • Centrally located with high walkability among highly desirable amenities such as performance venues, popular restaurants, and public transportation.
  • Prestige and a strong professional presence demonstrates a respectable image to both  clients and employees.

Cons

  • Congested traffic conditions and unfavorable commuting requirements for daily employees.
  • Rental rates and other associated costs are at a premium when compared to alternatives located outside of the CBD.

Suburban Office

Suburban office space refers to mid-rise office buildings that are located outside of the core of a  city’s center. You can think of these buildings as the medium-sized building you often see sprinkled throughout commercial corridors that run through suburban neighborhoods. Their sizes range from 80,000-400,000 square feet and may not have an elevator depending on the height. Suburban office parks are a subtype of this type of office class, in which several of these low to mid rise buildings are assembled into a campus-like setting. Although amenities are usually limited, suburban offices have several favorable characteristics over central business district offices. Below is a list of pros and cons:

Pros

  • Convenient location for employees and clients by not having to commute and fight downtown traffic.
  • Rent pricing and other associated overhead such as parking, is more affordable than CBD office locations.

Cons

  • Located away from popular major amenities commonly found in central business districts such as popular restaurants, public transportation and walkability.
  • Limited number of Class A buildings in these secondary locations may present a challenge to find desirable amenities.

Other Types of Offices

Mezzanine Offices

Mezzanine refers to office space typically built within an industrial facility that is usually located along the perimeter of the building and creates an intermediate floor. Mezzanine offices are great for industrial property tenants that have a need for onsite office space. They are usually raised off of the ground floor on a second level to maximize valuable floor space, and can even double as a break room or conference room.

The #1 Rental Property Newsletter

Once a Month We Send Out an Exclusive Rental Property Market Update with Exclusive Content, Exciting Products, Mortgage Trends, and More. No Spam and Unsubscribe Anytime.

Processing…
Success! You're on the list.

Office Real Estate News


Office Building Amenities

Office building amenities are provided by the building’s ownership to provide workplace balance for tenants and their employees. The degree of amenities at a particular building is usually dependent on the building’s class and location, among other factors. Below we take a look at some of the most common office building amenities based on building class:

Class A

  • Lobby Concierge
  • 24/7 Security
  • Night and Day Janitorial
  • Restaurant Dining Options
  • Executive Suites
  • Gyms and Fitness Centers 
  • Daycare Centers
  • Lounges and Creative Spaces 
  • Valet Parking Services
  • On Site Car Wash
  • Electric Vehicle Charging
  • Private Outdoor Space

Class B

  • On-Site parking
  • Exterior Security Patrol
  • Nightly Janitorial
  • Shared Conference Room
  • Cafeteria and/or Vending Machines
  • Common Outdoor Space

Class C

  • On-site Parking
  • Shared Conference Room
  • Shared Break Room and/or Kitchenette

Office Building Height Classes

Since office buildings vary so much in size, standardized height classes have been established to categorize office buildings by their height. Below are the 3 different types of office building height classifications:

  • Low-Rise: Fewer than 7 stories above ground level
  • Mid-Rise: Between 7 and 25 stories above ground level
  • High-Rise: More than 25 stories above ground level

Coworking

Coworking is a relatively new concept in the marketplace of office real estate, but has gained significant adoption by loyal users. Coworking refers to workspace that is offered for lease for short-term to long-term periods in a shared setting. Coworking spaces range from traditional private offices, to shared ad-hoc access to a lounge-type workspace full of amenities. Coworking spaces go far beyond just providing physical work spaces by also offering social events, lectures, access to business resources, and providing community for their entrepreneurial tenants. Some of the largest coworking brands include WeWork, Spaces, and Industrious.


Explore Other Types of Commercial Real Estate