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Paydirt: What defines a “Class A” office building?
Is it amenities, building condition or just vibes these days?
Labels can be important; but they can also be meaningless.
Office tenants be warned: When it comes to the definition of “Class A” can mean whatever building owners want it to mean.
In this edition of Paydirt, The Real Deal’s Hiten Samtani discusses the various ways the term “Class A” is used when it comes to office buildings.
The Building Owners and Managers Association, for example, defines the term as the most prestigious office buildings competing for the premier users with rents above average for the area with traits like state-of-the-art systems, high quality finishes, exceptional accessibility, and a definite market presence.
Fair enough.
But prominent figures in the market, such as RXR CEO Scott Rechler have discussed shedding commercial assets that aren’t elite and holding on to Class A buildings. But, as Samtani notes, RXR walked away from 61 Broadway in May after defaulting on a $240 million loan.
However, in marketing materials, RXR describes the buildings as “a premier Class A office building.”
“So it’s hard to tell what’s up and what’s down any more,” Samtani says.
In a time of existential challenges for the office market, is “Class A” may just be a state of mind.