Appraising Industrial Buildings
http://www.appraisalarticles.com/articles/2641/1/Appraising-Industrial-Buildings/Page1.html
Glenn Rigdon
The author, Glenn J. Rigdon, MA, MRICS, ASA is a commercial appraiser real property / broker. He was the Economist AZ State Land Department and Staff Specialist ROW - Legal for NDOT. See http://www.horizonvillageappraisal.com/ and our sister site at http://www.nevadacommercialrealproperty.com for more information or call 1-702-568-6699. By Glenn Rigdon
Published on December 15, 2011
Industrial buildings are a mixed bag and their appraisal requires that appraisers pay attention to a number of location and physical factors.
The industrial building appraisal process is complicated by the non uniform nature of industrial building improvements and their diverse sites. The range of improvements classified as industrial includes; small, flex buildings that can have a 100% office build-out to huge box 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 important and industrial buildings often fall within industrial parks that offer amenities like close accessibility to highways and rail spurs for shipping and receiving. Being close to an economic center, like the Las Vegas Strip, is also a great plus.
Industrial properties are often designed functionally for 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. Some industrial buildings have 12' wall heights with many support beams while others have 28' wall heights and no central supports. Industrial building construction materials also vary much more often (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 built for heavy industrial uses have "heavy" steel I-beam supports with 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, 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 areas or parking areas while others have large sites that accommodate trucks, equipment or material storage. Industrial condominiums have also started to become popular in the Las Vegas area.
Build-out within an industrial building is always an appraisal challenge. While it may be relatively easy to calculate what the cost of the improvements were, via supplied cost information or via cost manual estimates, 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 to industrial buildings like offices, water lines, power distribution lines, shelves, overhead ducts, etc. may add much less than their costs to the market value of the building. 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. 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 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.
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.
Of course location is important and industrial buildings often fall within industrial parks that offer amenities like close accessibility to highways and rail spurs for shipping and receiving. Being close to an economic center, like the Las Vegas Strip, is also a great plus.
Industrial properties are often designed functionally for 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. Some industrial buildings have 12' wall heights with many support beams while others have 28' wall heights and no central supports. Industrial building construction materials also vary much more often (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 built for heavy industrial uses have "heavy" steel I-beam supports with 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, 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 areas or parking areas while others have large sites that accommodate trucks, equipment or material storage. Industrial condominiums have also started to become popular in the Las Vegas area.
Build-out within an industrial building is always an appraisal challenge. While it may be relatively easy to calculate what the cost of the improvements were, via supplied cost information or via cost manual estimates, 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 to industrial buildings like offices, water lines, power distribution lines, shelves, overhead ducts, etc. may add much less than their costs to the market value of the building. 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. 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 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.
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.