Small Office Building Valuation

[Brian McCabe]

This 2-story building is brick and reinforced concrete construction comprising approximately 10,000 sf of rentable space. However, it has no basement. How does that affect valuation all things being equal? In other words if two similar buildings are being compared wherein one has a basement and the other doesn't what percent discount does the one without the basement get?

 

[Artemis Fowl]

This 2-story building is brick and reinforced concrete construction comprising approximately 10,000 sf of rentable space. However, it has no basement. How does that affect valuation all things being equal?

Well...you only provided information on ONE thing.
Besides a lack of information, kinda hard to comment without doing the work necessary to comment with any credibility...we get paid for that kinda thing.

 

[Howard Klahr]

if two similar buildings are being compared wherein one has a basement and the other doesn't what percent discount does the one without the basement get?

As has already been noted, you have not provided sufficient information to address your question. The valuation of office buildings are typically based on the rentable area of the building. In your example, what portion of the basement area reflects rentable area? For the building without the basement area, what percentage of the building represents the mechanicals that are likely located in the basement of the other building? Are both buildings, multi or single tenant or is one multi and the other single tenant?

These are just some of the questions that need to be addressed in order to ascertain how the two building compare to each other. So to address your specific question, what percent discount is applied, it depends.

 

[Brian McCabe]

As has already been noted, you have not provided sufficient information to address your question. The valuation of office buildings are typically based on the rentable area of the building. In your example, what portion of the basement area reflects rentable area? For the building without the basement area, what percentage of the building represents the mechanicals that are likely located in the basement of the other building? Are both buildings, multi or single tenant or is one multi and the other single tenant?

These are just some of the questions that need to be addressed in order to ascertain how the two building compare to each other. So to address your specific question, what percent discount is applied, it depends.

Got it. Both buildings would be single tenant. None of the basement areas would be rentable. And the mechanicals comprise approximately 5% of the RBA.

 

[Pittsburgh Pete]

Do buildings with basements, which could be used for tenant file storage etc., command more rent? Can this area be converted to rentable area? If the basement doesn't contribute to the bottom line, there should be little or no difference in value.

 

[Pittsburgh Pete]

Another thought. If basement doesn't generate any additional income, it could be a detriment as it might contribute to higher expenses in the form of utilities, maintenance, etc.

Bottom line might be, does the market care?

 

[NachoPerito]

Put your opinion on the market rent for above grade versus below grade space and turn that into an adjustment.

For example above grade office is $10/SF NNN and below grade office rents for $7/SF. The difference is 30%.

 

[Brian McCabe]

Do buildings with basements, which could be used for tenant file storage etc., command more rent? Can this area be converted to rentable area? If the basement doesn't contribute to the bottom line, there should be little or no difference in value.

This is my view but I wasn't confident that I was on firm footing. While I think there is a value to basement space for storage, in the buildings I come across basements are suitable for little else but mechanicals. Appreciate your weighing in. Thanks

 

[Brian McCabe]

Put your opinion on the market rent for above grade versus below grade space and turn that into an adjustment.

For example above grade office is $10/SF NNN and below grade office rents for $7/SF. The difference is 30%.

Great idea for the right market. Not where this place is, however. Thanks