Commercial Appraisals

[ck1architect]

I have a commercial office building with about 18 units, average square footage is 250sf. Would the building loose value if I combined some units into 500sf offices?

 

[TerryRohrer]

Generally, all we can do from outside your market is guess what impact changes might have. No one can know with certainty, but changes that increase net operating income will tend to increase value and those that reduce NOI will tend to reduce value. Presumably, you are contemplating combining units to address some issue(s) you are experiencing now. What are you trying to solve? Did something change that lead to the need for action?

 

[Terrel L. Shields]

I have a commercial office building with about 18 units, average square footage is 250sf. Would the building loose value if I combined some units into 500sf offices?

If the per unit SF rents are roughly the same, it shouldn't impact value except. 250 SF is very small even for a small office so I assume you believe the demand for a larger office exceeds that for the small offices. You could convert half into larger spaces and then watch which remains the most occupied. I would say a larger office would allow more flex. 250 SF would be pretty small for say an insurance office with a secretary. 3 people would be impossibly small in my opinion. So yes, I'd bet the larger space will be easier to rent out. 250 SF spaces are like meeting sites that say a CPA working at home would only meet in the office by appointment.

 

[Zephyr999]

I have a commercial office building with about 18 units, average square footage is 250sf. Would the building loose value if I combined some units into 500sf offices?

Whats the historical occupancy? Idk, offices in general are not doing well with most leases reducing SF, not expanding.

 

[ck1architect]

Generally, all we can do from outside your market is guess what impact changes might have. No one can know with certainty, but changes that increase net operating income will tend to increase value and those that reduce NOI will tend to reduce value. Presumably, you are contemplating combining units to address some issue(s) you are experiencing now. What are you trying to solve? Did something change that lead to the need for action?

We are looking to achieve 100% occupancy with dependable tenants. We have vacant units (3) adjacent to current tenants that would like to expand. We acquired the building only 3 months ago and my concern is making an alteration that would reduce the number of leasable spaces.

 

[TerryRohrer]

We are looking to achieve 100% occupancy with dependable tenants. We have vacant units (3) adjacent to current tenants that would like to expand. We acquired the building only 3 months ago and my concern is making an alteration that would reduce the number of leasable spaces.

My preference in your place would be to try and find a means to combine units in a manner that could be readily converted between the two configurations without excessive cost or delay. But, clearly, existing tenants are looking for something you don't currently offer, so those might well be worth keeping satisfied if they have been there for a bit and seem intent on staying.

 

[Gobears81]

There is a bird in hand with having dependable tenants wanting to lease the space, but just to throw a couple possible considerations out there:

In my market, the smaller the office space, the easier to find tenants. But if the 250 SF units aren't entirely self-contained spaces, it might be no loss in functional utility to combine, especially if all of the spaces are that size. Hard for us to say without knowing the building, the restroom/ utility configurations, not to mention your market. Providing co-work or some variant of it is something that I've seen for the buildings with extremely small spaces or where they are renting out individual offices.

Another consideration is how long of a lease that the tenants would be willing to sign. If there is a 5 or 10-year lease at a decent rent and a good tenant, I would be less concerned with preserving functional utility vs a year-to-year lease.

 

[ck1architect]

Typically the market is for small business owners that need a physical address for their businesses. Only a few, the ones that want to expand, operate out of their offices on a daily basis. The building is 2-stories with 2 restrooms, a breakroom and a conference room on each floor.

 

[sputnam]

The real question should be... Would the increased occupancy/retention rate and/or rents justify the construction/demolition costs? One thing to consider.. if you converted from 250 sf offices to 500 sq ft offices... you reduce the number of tenants. Would your market support double the rent for the larger space?

 

[Tom D]

i'm residential, but wouldn't flex space increase the tenants looking at it. but then again don't add more items to a good menu. just like rehabing, i look at what's happening at the higher fixed up price range, and what are buyers getting, or expecting.