Office Property Classes: A Guide to Understanding the Commercial Real Estate Market in Brazil

In the office real estate market, the concept of "property classes" is commonly discussed. For instance, in the main corporate city of the country, São Paulo, there are approximately 8 million square meters of Class A+, A, and B office spaces, according to data from SiiLA. But what exactly are property classes, and what purpose do they serve in the commercial real estate market? Let us explain.

Property classes are categories used to classify and evaluate the quality and characteristics of a property, providing a general reference to describe the condition and level of finishes in a building. The most common and highest-ranking property classes are A+, A, and B, while there are also properties classes C that bring less amenities for their occupiers.

These classifications are important as they provide valuable information about the current state of properties and contribute to making informed investment decisions, since each asset, whether it's A+, A, B, or C, will have its final use geared towards a different audience. SiiLA offers intelligent solutions for the commercial real estate market, such as Market Analytics and SiiLA SPOT, which allow people to access relevant information about properties, including their classification and features.

So, how are office properties classified, and what characteristics are considered for their classification?

All the commercial real estate properties monitored by SiiLA are independently classified using a clear methodology of analysis and scoring based on the characteristics of a development. Below, we present the key criteria for the classification of offices in the city of São Paulo.

1- Average Floor Area: This metric quantifies the average leasable floor area in m² for a typical office floor. Class A+ buildings usually encompass 1,200 square meters or more, while Class A buildings typically range around 1,000 square meters. Class B properties start from 400 square meters, and Class C properties start from 300 square meters. Understanding the average floor size holds significance as each tenant has unique office space requirements. Larger companies often seek high-end properties that can accommodate their entire workforce under one roof, whereas smaller companies often prefer spaces with compact offices that suit their operational needs. This underscores the importance of comprehending the type of asset suitable for one's business, which holds true for both investors and tenants.

2- Air Conditioning and Building Management System: These elements serve as crucial prerequisites for a building to earn Class A+, A, or B classification. The absence of one or more of these specifications can result in downgrading the asset´s class. These features prioritize tenant comfort and facilitate more efficient operations when integrated into properties exhibiting such characteristics.

 3- Ceiling height: To be considered A+, the ceiling height needs to be 2.70 meters or more. For Class A, it starts from 2.60 meters, and for Class B, it is 2.50 meters.

 4- Parking ratio: The parking ratio measures the relationship between the leasable area in square meters and the corresponding number of parking spaces. A+ and A properties have one parking space for every 35 square meters, while Class B properties have one parking space for an 50 m² office area.

 5- Sustainability certification: Nowadays, there is a growing focus on environmental, social, and governance (ESG) practices. Having a sustainability certification is essential for properties to be classified as A+ or A, while Class B properties may or may not have the certification.