The Task of Inspecting Commercial Property

My property management team and I analyze the current condition of each property we manage on a monthly basis. The first task is to make a detailed physical inspection of each property to determine what condition the property is in. Each type of property is intended for a particular purpose. Each property is marketed for a particular type of use, i.e. office building, retail center, industrial complex and so forth. The top two reasons we make each inspection is 1) to provide us and the owner with an inventory of marketable spaces and 2) to determine the physical condition, both interior and exterior, noting problems and listing solutions. For example, a roof that is in a state of disrepair can leak, causing interior ceiling damage. The solution would be to repair or patch the existing roof or in some cases replace the roof altogether.

A detailed property inspection must be thorough. These are the five areas of inspection a competent property manager can be expected to follow:

1) The property manager will start by inspecting the exterior construction and condition of the building. This includes not only maintenance problems, but also aesthetic problems presented by the exterior surfaces and façade. For example, the landscaping may be serviceable but the general appearance of the building may require cosmetic improvements.

2) Common areas are important. This includes outside common areas such as parking areas, walkways, landscaping as well as interior common areas such as lobbies, stairways, elevators, etc. The appearance of these areas is one main criteria of desirability for tenants, especially in Class A buildings or larger neighborhood shopping centers.

3) Ancillary areas such as spaces used for storage, garage, shop, or other building functions should be examined not only for maintenance problems but also to determine how well the space fulfills its designed use.

4) For all mechanical systems and equipment ask if the equipment is in proper operating condition. Does this equipment fulfill the needs of the property? What is required to place the equipment in proper operating condition? Question whether any of the systems, although operative, should be modernized, replaced or added to in order to properly operate. A property may have an adequate ventilation system however the best use of the property may require a radical expansion of the present air conditioning system. Mechanical equipment should be reviewed for its rated capacity as measured against the requirements of the property, its rated life, its efficiency of operation and the ease of maintenance.

5) The physical layout and finish of the rental space is significant. Do the floor plans conform to market requirements? A proper layout may have improper lighting or inconvenient electrical outlets. What areas of the property could produce income but are not presently doing so?

The causes of physical problems that are uncovered during our inspection come from three sources: deferred maintenance, functional obsolescence and economic obsolescence.

Maintenance can be deferred on some items to save money if no further damage will result. For example, a wall in a public area needs painting. As a manager you may decide to postpone the painting until a later date and perhaps have all the interior painting done at one time. We call this deferred maintenance. However, in contrast, a leaky roof may lead to expensive, physical damage to inventory, walls and ceilings and therefore, needs to be attended to immediately. It would be irresponsible to place it in the deferred category.

Items which may not be worn out but may be rendered obsolete by current construction standards and consequently by market demand are categorized as functional obsolescence. Functional obsolescence often can be corrected with maintenance upgrades and physical changes to space. For example, a large retail space such as an unoccupied supermarket in a tired, poorly located strip center can be transformed into smaller, user-friendly office and retail spaces of 2,500-square-feet or less with some modernization and new space design. An office building may survive with functionally obsolete features, but such features will continue to limit its ability to thrive.

Economic obsolescence is defined as obsolescence which is external to the property. In other words, changes in the environment outside of the building or complex that make a property (that was active several years ago) obsolete in today’s real estate marketplace. For example, an office building which had been very desirable for several years may diminish in economic desirability due to changes in street direction which has undesirable effects on access. Unlike functional obsolescence, economic obsolescence may be harder to correct but a good property management team can find solutions and overcome all types of problems a challenging commercial property may provide.

Reset password

Enter your email address and we will send you a link to change your password.

Get started with your account

to save your favourite homes and more

Sign up with email

Get started with your account

to save your favourite homes and more

By clicking the «SIGN UP» button you agree to the Terms of Use and Privacy Policy
Powered by Estatik
Scroll to Top