Market insight: What makes an office Grade A?
Market insight: What makes an office Grade A?
Anyone who has considered renting an office, or who has even just considered the market for business space will most likely have come across the grading system used by agents to signal a building’s quality, but how do agents decide what grade is appropriate?
No universal grading system exists and, as such, the specific definition of what makes a Grade A, B, C or C- building will vary from market to market and in some cases even from agent to agent. However, broadly there is a common theme running through the definition of office grades at an international level which allows multi-national companies to more easily benchmark their requirements and target specific sectors of the market.
CBRE Cambodia has constructed our own definition of office grades tailored to the Cambodian market but reflective of international standards; this helps bring clarity and certainty to the definitions for our agents, partners and clients.
Broadly a Grade A office is defined as being a flagship building able to compete for premier occupiers and commanding market leading rents as a result. The building will have high quality finishes throughout, incorporate state of the art building management and health and safety features, provide excellent accessibility and have a notable market impact. Location is an important factor for a Grade A office; they will usually be found in the core of the Central Business District (CBD) where the highest rents can be commanded, and where market leading tenants prefer to be located.
More technically, the definition describes a Grade A office’s likely specification as including minimum 2.7 metre floor to ceiling heights, raised floors, suspended ceilings, 24/7 security, centralised air conditioning and full, international standard, centralised fire protection and detection systems. The property will be purpose built and to a high standard of design. Floor-plates are usually in excess of 1,000 square metres with minimal intrusions and a bright, open design. Property management will be market leading in a Grade A building, either provided in-house by a group of experts or handled by an internationally recognised management agent with the experience and resources to ensure tenants receive top end service.
Grade A offices largely attract professional companies especially those from the financial sector, many of whom will be of an international origin and therefore used to occupying space of the specification and quality that Grade A denotes. Often, although a company bases their country headquarters in a Grade A building,they might target lower grade space for functions which are not client facing, or which require large volumes of space which should be obtained at a cheaper rate.
Grade B offices are more functional in their design, targeting and specification; yet are able to command average or slightly above average rents and with smaller floor-plates, reduced ceiling heights and less security. CBRE defines Grade B buildings as presenting a professional image, typically purpose built and benefiting from air-conditioning and minimum 2.5 metre floor to ceiling heights. Grade B offices are more mass market in their appeal and can be located both within and outside the CBD.
Grade C and below are less formal in their arrangement and cover a broad range of specifications, locations and levels of design. What they have in common is the provision of functions and economical space, usually at rents below the market average.
Building safety systems and management can be of mixed quality and the space is not necessarily located within a purpose built office premises. Again floor plates can vary in but are generally small, sometimes with restrictive structures such as columns or supporting walls dividing the space. Specifications also vary but ceiling heights are typically limited, any air-conditioning is likely to be on a split system basis and security could be lacking.
In practice, an experienced office agent can determine the grade of an office building quickly and accurately using their market knowledge to place the property in its appropriate market segment. Of course, the grades are in themselves a spectrum, with individual buildings finding their own market positioning as a natural consequence of being exposed to the scrutiny of prospective tenants. Agents like CBRE Cambodia present a building’s grade as a signpost to help tenants and occupiers quickly gauge whether a building might be suited to their requirements.
