Office Investment Property

Office properties are located in either the Central Business District (CBD) of major cities or in its surrounding suburban markets. Buildings in the downtown CBDs run the gamut from brand new Class A buildings to older, less up-to-date Class C buildings. A building's services, age and amenties are taken into consideration when determining the appropriate class designation for CBD office properties.

Office building classifications

Class A office buildings, generally speaking, have a 100,000sf of gross leasable area (GLA), a prime location, superior tenant profile, professional building management, new or extensively renovated finishes, up-to-date mechanical/electrical/plumbing systems, security and computer systems, and superior telecommunications facilities. Any special retail services and amentieis in the building that are comparable or exceed the market would be viewed as a plus but their presence is not as essential in the CBD as in the suburban market. Class B and C properties are usually older, pre-1990 construction, have not been renovated, have less amenities and generally inferior facilities.

Suburban office buildings have many of the same characteristics as CBD office buildings except the gross leasable area will be much less. In addition these properties should be conveniently located to area regional malls, hotels, restaurants, and provide ample parking and quick access to area highway networks. Medical and dental professional offices are typically located close to area hospital and other medical facilities and area easily accessible to area transportation networks.

Key considerations for office property types

The considerations listed below apply to both CBD and suburban office properties. These factors will affect the analysis of the property, its cash flow as well as the quality score awarded to each property. Most of these factors are focused on ensuring the stability of cash flow while minimizing erosion of real estate value during the holding period:

  • Structure and design
  • Floorplate
  • Location
  • Employment growth
  • Parking
  • Occupancy
  • Tenant roster
  • Management
  • Competition
  • Lease structure

 

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