Comparing Commercial Condos and Buildings

As I search through data on real property sales the odd commercial condo always presents itself in the list of sales data.  What always surprises me is that as an appraiser I expect to see the sales price per square foot (SF) to be lower than the attached or detached building sales but surprisingly the condo sales are at or above those of the other types.

It appears from the casual observations of an appraiser, based on sales prices per SF, that commercial condominiums are not being looked upon in the Las Vegas / Henderson Nevada market as a second-class option.

Condos are often smaller than the smallest building improvements.  A professional like an attorney, a dentist or a doctor looking for his or her own property would be hard pressed to find a 1,700 SF building but there are usually a number of condo units for sale with that size.  The alternative, at least here in Nevada, is a renovated home with arterial roadway frontage but even those average over 2,000 SF.

While smaller than most stand-alone buildings condominiums often benefit from being in larger, well-appointed buildings, some with fancy lobbies and large shared parking areas.  While you may not own the entire grounds that doesn’t mean that they have to not be impressive.

Once you own a commercial condominium you can improve it as you like.  There are no restrictions on when and how you make changes like there often are when you rent.  There may be some rules regarding conformity but generally you have a lot more flexibility as the owner. 

Operationally commercial condo owners share building maintenance and in some cases they share the costs associated with common areas.  All of the condo owners in a development benefit from common building repairs and grounds maintenance.  It’s a good deal for those that don’t want to have to pay for major expenses out of their own pocket or are not good at managing a reserves account.

So why haven’t commercial condominiums exploded and dominated the market?  It’s a relatively new concept in the commercial real property market and its hard to buck the personal ownership of the land and the building which is a concept that has been around for a long time.

Using an office condominium as a comparable to a stand-alone office building is not a choice that I would make in my appraisal report unless there were absolutely no other sales to rely upon.  It’s like apples and oranges, they just are not the same, and while I look at the sales I rarely use them.

When I’m appraising a condominium I likewise try to stay with condominium comparable sales.  You have to ask yourself would a buyer or seller in the market for an office condominium compare it to a stand-alone building?  The obvious answer is that they would not.

For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/

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