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Industrial Condo Measurements

Updated: Apr 20

One of the commercial appraiser's "most difficult - easy" assignments can be an industrial condominium. While sales data are frequent and usually homogeneous, obtaining the right gross leasable area usually is not so straightforward, resulting in potential price-per-square-foot and/or office percentage errors in the appraiser's analysis. There are a few reasons for this:

  1. Some developers "goosed" GLA by including overhangs or other unusable areas to market larger bays, and these measurement errors persist through broker memory and pass-thrus to condominium documents and county assessor records. They'll be wrong forever.

  2. Some mezzanines finished as office space do not have a second means of escape and are therefore approved only for "storage" although they are furnished for office activity. While a buyer may shrug, lenders tend to observe the rules a little closer.

  3. As for mezzanines, BOMA - the single source of measurement standards - is of little help deferring to whatever is agreed upon by principals. As an appraiser, mezzanine descriptions are inconsistent and so proactively discerning how a buyer or lender will perceive the space (and thus total GLA) is impossible. We try to determine the "market standard" and do the best we can.

Here are my thoughts:

  • How you handle industrial condominium measurements all comes down to your comparable data. If everything is in the same development with the same attributes, you can justify anything as long as you are consistent. If, however, your comparables are in different developments and/or vary significantly, you'll spend more time digging out the appropriate GLA on each than you probably budgeted the fee for.

  • BOMA standards require interior measurement. Almost nobody does this, since we can't get inside most comparables. It would be unfair to rely on interior dimensions for the property we are appraising and use developer or broker exterior measurements for comparables because we would undervalue the property.

  • Determine how your property is measured by comparing GLA from the condo doc survey measurements to your on-site measurements. This will tell you whether they used interior or exterior measurements, which will help you determine the correct measurement for comps with different plans from the subject in the same development.

  • Continuing with the condominium document survey, determine a comparable's ground floor measurement. If your data source shows a significant difference, there is probably a second floor and/or mezzanine in that bay. Always figure this out first so that you can verify it when confirming the sale. If nobody can confirm it, you are on dangerous ground so give that comparable less weight. Market participants won't overlook the sale so in many cases you shouldn't either, even though you don't have complete information.

  • Metal rack platform mezzanines are free standing and removable, so should never be included in GLA. Most brokers observe this rule, but not all, and the one's that don't also won't explain this in the MLS comments so you have to ask.

  • An unfinished mezzanine is simply low-clear space and reduces clear height below (unless it's over offices). I've found through my sales and leasing experience that, by the time a business starts using its mezzanine, it is ready for a larger facility. It's a sure sign they're going to move soon. So, unfinished storage mezzanine is worth little to most businesses, and should almost never be included in GLA.

  • Mezzanine finish as office takes many forms from minimal to what you'd expect to find in a Class-A office. Most MLS will have photos, and if you are prepared to ask you can find out what it's like when you verify the sale. Still, this can be a tough call because of verification subjectivity, and second floor office space is just not as appealing as ground floor space anyway. At least be sensitive to this in your size adjustment. I've found cases where it made sense to report the mezzanine as GLA but adjust separately for functional obsolescence.

I could go on and on about this. Essentially, the appraiser has to do their best to be consistent. When they can't be entirely certain and have made some judgement calls, they'll consider how the adjusted sales are weighted for reliability. Small GLA and/or office percentage differences can make significant differences in your observations and conclusions.

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