Robert
S. Michaud, P.E.
For anyone who has purchased a home, especially when using a loan
from a bank or other financial institution, you know that a
pre-purchase home inspection is almost always required. So why is
this not the case with commercial real estate transactions? They may
not be required by lenders but that doesn’t mean you shouldn’t
consider having one performed. In fact, it may be the single most
important act you perform prior to signing for the new property.
Let’s examine why that is the case.
Commercial real
estate is, by definition, about business – commerce. All
businesses must focus on profitability, which means the income must
exceed the out-go. Buildings are necessary for many of our business
functions, and while their long term value is typically considered an
asset, their day to day operation involves expenses. When
considering the purchase or lease of a new commercial property, it is
critical that the purchaser or lessee have a firm understanding of
what the capital and operating expenses might be. You wouldn’t
purchase a home with a leaky roof or a faulty boiler, so why would
you blindly purchase a building for your business without the same
basic level of understanding about the building? In fact, if you
select the right inspection company, you can learn much more about
the property, such as energy usage projections and equipment
lifecycle expectations, and that can help you make the best informed
decision possible.
Commercial building
purchases or long term lease agreements are, or should be, logical
and economic decisions and the tend to be, less about emotion than a
residential real estate transaction. While in both cases things like
location and aesthetics are important, commercial real estate
transactions are fundamentally more concerned with how the purchase
or lease will help the business grow. To that end, a detailed
analysis of the attributes and faults of the building should be seen
as a way to determine whether or not it will fulfill the needs of the
company rather than more subjective concerns.
Another reason that
conducting a building inspection prior to purchasing or leasing a
commercial property is so important is due to the complexity of
commercial building systems as compared to residential ones. While
some home buyers will feel very comfortable taking on home
improvement “D.I.Y.” projects, the equipment and systems found in
commercial buildings is often much more complex and unfamiliar.
Additionally, you are in the business of running your business, not
acting as a carpenter, electrician or HVAC technician typically.
Still, you need a qualified professional to analyze these systems and
provide you with easy to understand reports that allow you to manage
the building that you choose to lease or purchase. Armed with a
quality inspection report, you can properly plan for the required
maintenance and upgrades that you will need for your building.
One more
consideration for commercial buildings that should not be overlooked
is that they are typically subject to very different regulations
compared to residential buildings. Things like the Americans With
Disabilities Act, along with local, state, and federal building code
requirements must be considered and understood as they can have a
direct impact on the final cost of the building. A qualified
inspector with experience inspecting commercial buildings can
identify these for you and help you understand the potential costs
involved. Failure to take this into consideration could be extremely
costly. For instance, perhaps you are considering the purchase of a
building that had not been used for retail purposes in the past, but
is in a great location and has great “curb appeal” – a real eye
catcher that you hope will draw in customers. Unfortunately, the
primary entrance is up a short flight of stairs and leads to an
ornate old door with an old fashioned knob for hardware. You may be
forced to make significant changes to the entrance to allow for ramp
access and a change in the front door to make it ADA accessible.
These changes may or may not effect your decision to purchase the
property, but you deserve to have the information in advance so that
you can weigh the pro’s and con’s before making your decision.
Now that you know
why you should have a building inspection performed before leasing or
purchasing a commercial building, the next question is how do you go
about it. First, talk with your real estate agent about your
interest in finding a qualified inspection company to review the
building. You can also conduct your own search in your area. Be
careful to select a consulting firm or inspection company that has
experience specifically in the inspection of commercial buildings.
As noted earlier, commercial buildings are often significantly
different from residential structures and your average home inspector
is not equipped to provide you with the analysis that you need to
make your decision. Realtors – if your business lists or assists
buyers in the purchase of commercial buildings, seek out those firms
in your area that can provide these services and have experience in
this area. You will be providing a valuable service to your clients
and in the process of helping them make financially sound choices,
you will be improving your credibility in this market.
Building inspections
are a vital service to the building owner and their importance is not
limited to just the initial transaction. There is valuable
information for all building owners and managers that can only be
gained through periodic inspections. Even after the real estate
transaction is over, consider periodic inspections as part of your
ongoing maintenance and operations process. These inspections will
help you keep track of improvements that have been made to the
building as well as to re-assess the condition of the systems to plan
for future work and upgrades. It is far more cost effective to plan
for maintenance and capital improvements to your facility than it is
to wait for a system to fail and then have to deal with repairs on an
emergency basis. “An ounce of prevention is worth a pound of cure”
– this axiom from Ben Franklin is as true today as it was in his
day. Find your qualified building inspector and help prevent
unwanted problems in your building.
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