Thursday, May 10, 2012

Building Valuations - Site Considerations

In examining a price/ft. analysis on a specific building or in comparing other property options, ensure you review the site considerations of the properties involved. Namely, the site size and the site coverage.

The site size is simply the amount of land that is being sold with the building. Is it an acre or 20,000 sq. ft.? Beyond its size -- is the lot square/rectangular/pie shaped? You might also consider its positioning (corner lot/mid-block) and if it includes any natural
hazards (ie. drainage ditch/restricted wood lot).

Site coverage than becomes a measure of the % of the site the building occupies. For instance, a 10,000’ building on a 40,000’ site, gives you a site coverage of 25%. A lower % usually suggests that the site is not developed to its fullest potential, whereas
a higher % (say 50%+) may suggest the site is fully built out.

In the case of site size (ie. 1 vs. 2 acre), a premium allowance may need to be made, when considering the building price/ft. for the property on the larger site. Similarly a low % lot coverage may a again suggest a premium per/ft. allowance, given the apparent ability to expand the building on the current site. Note however, that this is something you need to review very thoroughly with your local municipality (specifically building department), to confirm the ability to expand.

The above may help explain price/ft. differences in looking at comparative real estate options in your market. They may also help you to justify your ultimate purchase. But more importantly it is only one further metric and still must be weighed against other variables – such as building condition, age, location, zoning issues and mortgaging options.

Site issues clearly need to be considered when considering your commercial property options, and hopefully this gives you a means to quantify sites in making comparisons. Again, consult an experienced commercial broker in your market to assist you in your site considerations and as you evaluate property options.

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