Class C Building

Image of the alphabet character "C" representing the building classification description Class C Building

Class C Building. 

True Story. I was speaking to a colleague who described a property he was underwriting as being a classy building. He went on to say that although its old, tired and needs some TLC, the cash-flow was strong. I said you’ll have to excuse me, but you first stated the building was classy, then proceeded to tell me it’s dilapidated. “Which is it”, I asked? He replied – “it’s a Class C building, NOT a ‘classy’ building”!


Building Classification

Not all commercial real estate buildings are created equal, which is why they are generally classified as being either a Class A, Class B, or a Class C building. The difference between each classification varies by market, are relative to other buildings within a sub-market and exist to categorize the age, amenities, aesthetics and general infrastructure of buildings. Although there is no uniform standard for classifying a building, typical characterization is as follows:

  • Class A. Highest quality buildings in their market.
  • Class B. Above average, slightly older buildings with good quality management and tenants.
  • Class C. Poorest quality, old structures, in less desirable areas in need of extensive renovation.

General Characteristics of Class C Property’s.

When identifying a Class ‘C’ property, you’ll want to consider the age, condition and location of the building(s).


  • Typically older, first and second generation properties that generally range in age from 30 to 40 years.


  • Architecturally dated, construction quality, materials and techniques are subpar – not comparable.
  • Building systems (mechanical, electrical, HVAC, elevator and utility) have capacities that may not meet current needs.
  • Building services and/or amenities are basic and are characterized by the existence of below average maintenance, management and upkeep.


  • Sub-markets, secondary and tertiary markets.
  • In less desirable locations relative to the needs of major tenant sectors in the marketplace.
  • On a busy street in a metro area outside the heart of a city.
  • Near a major artery but its entrance is out of the way and easily over­looked.
  • Demographics have been the same for 30 years and not changing, or in a market area that is undergoing a transition, with new demographics coming into the neighborhood.

What does a Class C property look like?

Is it the Mercedes-Benz of property types or is it analogous to a piece of coal – the diamond in the rough? Here are some broad examples of property types we would classify as Class C:

  • Junk Yards – Scrap Metal, Wrecking, Salvage, Recycling.
  • Mixed-use Real Estate – Multiple property uses within a single building.
  • Religious Organizations – Houses of Worship, Churches, Synagogues, Temples.
  • Automotive Related – Truck & Auto Repair, Service, Parts, Stops/Terminals, Non-Flagged Gas Station, Car Wash, Dealerships, Garage/Storage, and Parking Lots.
  • Hospitality – Non-Flagged Hotels & Motels, Board & Care, Halfway & Sober Living, and Fraternity & Sorority Houses.
  • Light Industrial – Storage Cold/Freight, Nursery or Contractor Yards, Factories & Manufacturing Plants.

Class C Building Recap

Class C buildings may be owner-occupied with no rents, or if leased, have the lowest rental rates and take longer to lease out. They typically have significant differed maintenance, and building systems (mechanical, electrical, HVAC, elevator and utility) that need upgrading or replacement, and as such are often targeted as rehabilitation or re-development opportunities. While they may cash-flow, the cash flow is often diminished greatly due to high maintenance costs and lack of payment by tenants.


Because of their age, location, condition, etc., c-class properties pose a higher risk of default and if taken back, will need to be fire sold at a steep discount to unload from the books, or require a lot of time, money and expertise to bring the property to a marketable standard – in order to lease or sell at fair market.

Next time you’re looking at a commercial building, you should be able to determine if  it’s a Class C building, or a ‘classy’ building!

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