Appraising Industrial Buildings

The industrial building appraisal process is complicated by the fact that industrial buildings are not uniform in their construction and they are supported by diverse sites.  The range of improvements classified as industrial includes; small, flex buildings that can have a 100% office build-out to huge big box storage and manufacturing facilities that may have little or no office area.  Also considered industrial are; R & D, manufacturing, mini storage / self-storage, industrial garages, hangars, truck terminals, warehouses (cold storage and refrigerated), water treatment facilities, railroad yards and utility sub-stations.
Of course location is an important factor affecting value and many industrial buildings fall within industrial parks that offer amenities like close accessibility to highways and rail spurs for easy bulk shipping and receiving.  Being close to an economic center, like the Las Vegas Strip, is also a great plus for an industrial property.
Industrial properties are often designed for a specific functional use by their original users.  Some users require multiple docks and many doors for shipping while others have the need for only a single vehicle entry door but use most of their building area for storage or manufacturing.  Some industrial buildings have a 12' wall height with many support beams while others have 28' wall heights and no central supports.  Industrial building construction materials also vary much more (at least in my market) than other building types.  It is not unusual to find metal, frame and masonry constructed industrial buildings in the same industrial development.  Some industrial buildings are built for storage and have relatively "light" frames while others were built for heavy industrial uses and have "heavy" steel I-beam supports with thick concrete foundations and overhead cranes.
Mezzanines are a feature of industrial buildings that can effectively increase their storage area or expand their office build-out.  As with other industrial building improvements mezzanines can be as simple as a plain wood supported storage area with ladder access to an excellent quality, partitioned office area with windows, stone floors, upgraded lighting, full a/c and elevator access.
Some industrial buildings have little or no land associated with them and their entrances / exits open onto a common area or small parking area while others have large sites that accommodate trucks, equipment and / or material storage.  Industrial condominiums have also started to become popular in the Las Vegas market and these units often have shared parking, common walls and common roofing.
Build-out within an industrial building is always an appraisal challenge.  While it may be relatively easy to calculate a building’s replacement cost via supplied cost information or via a cost manual, it is more difficult to conclude how much of a contribution the improvements add to market value.  Like swimming pools and additional garage additions made to residential properties improvements industrial buildings are often improved with offices, water lines, power distribution lines, shelves, overhead ducts, etc. may “added items” provide much less of a value enhancement than the cost of the improvements.  Most industrial buyers have their own use in mind and it likely doesn't match up with the industrial improvements made to an existing building, so getting a buyer to pay for those improvements doesn't usually happen when a property is resold.  3-phase power, sprinkler systems, compressors and air lines and docks are generally contributory since many users need or want these improvements.
Appraisers of industrial property discover early on that searching for comparable sales takes a great deal of effort and attention to location, use potential and physical characteristics like; building construction, building age / building condition, wall height, docks, mezzanine finish, sprinkler systems and other amenities is important.
The best place to start as an industrial building appraiser is with industrial brokers and industrial building owners.  They can provide you with the information that you will need if you want to understand the buildings and the market.
For more appraisal information contact Glenn Rigdon, MA,MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

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