Industrial Building Appraisals
by Administrator on Aug 17, 2016
Industrial buildings are constructed to span an entire spectrum of uses from simple warehousing to complex research and development facilities. Some have a single use and a single user while others have multiple uses and multiple users. Their size and construction quality range is wider than any other use type, you simply don't find as much diversity in retail, office or residential buildings.
Some of the physical characteristics that make industrial buildings so much different than other building types are things like; their variability in size, wall (or truss) height, office area or showroom area build-out, finished and unfinished mezzanines, land-to-building ratios, loading docks / wells / doors, quality of construction (including floor thickness), truck accessibility, power, sprinklers, parking, rail service and their proximity to the area or areas that they serve (AKA their location). Most industrial buildings are not air conditioned, except for finished areas, but there are cold storage buildings and others that are air conditioned.
That is why there are so many industrial building sub-types that include but are not limited to; warehouse, distribution warehouse, manufacturing, office / showroom warehouse, industrial flex mall, mini-warehouse, industrial auto and Research & Design (R & D). There are many industrial buildings constructed for specific or special purpose uses like athletic facilities, mining, power generation, water treatment, foundries, breweries, telecom / cloud storage, Labs, indoor growing facilities, airport hangars and forestry.
The use of some industrial building is at times difficult to tell from the outside. If you study its design and watch the activity going on at the building you can usually make an educated guess. Since there are differences in the prices paid for different building types it's important for an appraiser to identify differences. Assessors are often the source for industrial building detail. Assessors identity things like construction, size, doors, ramps, electrical power, office / showroom build-out, sprinklers, insulation, wall height and usually there is a use category that relates to the building's design.
Industrial buildings, due in part to their locations and the flexibility allowed by their industrial zoning, are often transitioned from one use to another when sold. Storage areas become machine shops, auto repair areas or the areas are at times finished for offices. One owner often has different needs than another. Some build and finish mezzanines that add to the overall building area. The problem for industrial building owners is that finding a buyer who will pay for the existing build-out is often difficult.
Appraisers have to make decisions about what is demanded in the market. If industrial warehouse buildings typically have an average 2% to 4% office build-out will the warehouse that you are appraising with a 12% office build-out be sold and will it's possibly $ 100,000 in office improvements be deemed an added value or an over improvement?
Most appraisers consider truck maneuvering distances especially when there appears to be some issue regarding their being sufficient room to turn trucks, and appraisers consider whether their comparable industrial sales have similar accessibility.
Some industrial buildings are on oversized lots and they have surplus or excess land associated with them. It's best for appraisers to look at the land-to-building ratios of the industrial building sales by use types. Industrial flex buildings may have small lots that allow for minimal parking, no onsite storage and auto and small truck access only while distribution warehouse buildings in your market area may have huge lots with land-to-building ratios near 3.5 to 1. You can't compare one industrial building type to another without ruining into major comparison problems.
Industrial buildings are generally lower cost structures than office and retail buildings. For industrial buildings it's usually more about function than visible appeal. Industrial buildings are located in industrial parks or in areas already developed with low cost buildings with construction yards or surrounded by acres of vehicle parking.
Some industrial properties have features or amenities that include, but are not limited to, truck scales, above and / or below ground fuel tanks, fenced areas, parking lots, outdoor advertising signs, cellular tower sites, mezzanines, hoists / cranes, below grade repair wells, doors and docks. All real property improvements must be reviewed and considered by appraisers in their reports. Appraisers consider the contributory value of improvements, if any.
Appraisers of industrial buildings must correctly identify their type and use the three approaches to value to analyze them. Appraisers in small towns however often do not see a wide range of industrial building types in their area and they often don't have a sufficient number of buildings to make comparisons.
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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