Inspection Tips and Tools For Commercial Investment Property

When you inspect a commercial, retail or industrial property, the physical aspects of the property should be well explored and documented. These matters below are some of the key issues for you to review before you complete the property listing or promotion.

Tenant compliance to physical building use: The tenants to a building may be obliged to comply with the way they use the building. Such matters will be detailed in the lease. It would help if you read the leases in this regard to identify these things.
Antennas and aerials: Some buildings feature communication antennas and aerials. In the first instance, these should have been approved by the landlord and, in some circumstances, the local planning authority. Then, the antenna or aerial installation will have been made on the approved structures with supporting plans and documentation and access restrictions and risk signage to prevent people in the area from being exposed to radiofrequency radiation. You need to know that these things have been correctly handled.

Asbestos: It is common knowledge that asbestos is a hazardous building material in buildings constructed before 1990. From that time onwards, it was largely avoided and prohibited as a construction material in most buildings. Originally it was used as an insulation material in areas including electrical switchboards and on the beams and columns of the building structure as a fire-resistant material. It is, therefore, quite possible that you will sell or lease a building in which asbestos is still located. In your town or city, there will be legislation rules and regulations that apply to the existence of asbestos. Therefore, you must get information from the building owner regards compliance with Legislation in this regard.

Asset replacement value: With commercial real estate properties, it is common for regular valuations to be undertaken by the building owner for insurance purposes regards asset replacement. This type of valuation would be applicable in the event of a fire or building disaster. You can also get building replacement values from information sheets provided by local quantity surveyors. You can usually obtain these from the internet. Importantly the construction costs and replacement value need to apply to your location given the costs of sourcing the construction materials and the labor.

Building Code Compliance: When buildings are first constructed, they are done to the current building code. As time progresses, the building code changes, and it is sometimes necessary for existing buildings to be upgraded to current code. A good example of this is the need for disabled access to buildings and internal disabled facilities. Therefore, when you inspect and list a building, you should identify if any such notices under the building code currently exist. A note of caution here; when a building is put through a major refurbishment, the planning authority may regard the refurbishment activity as a trigger for a code compliance upgrade. This can be a high cost. A quantity surveyor is the best person to consult on costs of this nature.

Floor and site surveys: When working with investment properties, it is the internal lettable space that is of prime importance to the generation of rental and occupancy. All the leases for the tenants will be linked to the survey plans and the net lettable area therein. For this reason, you should ask to see the survey plans for the building and the lettable space. You need to know that they are accurate and up to date at the time of sale or lease. Part of this process is to inspect the property with the plans to identify any discrepancies. In all cases of error or concern with the plans, you should get a building surveyor to give assistance and guidance.

As-Built Drawings: Every building has a set of approved plans for the building to be constructed. They are a great source of information and cover structural, hydraulic, electrical, mechanical, and lighting layouts. They are an excellent source of information on which you can base your leasing strategies.

Building approvals and permits: Does the building still comply with the original building permit issued by the building authority? Most particularly, does the use of the property still comply with the approval as granted? It pays to get a copy of the current building approval when possible because a wise purchaser or tenant will want to see it.
BMU: This stands for the ‘building maintenance unit’ and is likely to exist in multi-level buildings. The BMU is the device that hangs over the side of the building to clean the exterior and the windows at different times of the year. Importantly the BMU has to be safety compliant and also approved for use. Therefore, when you know that the building has a BMU, it is wise to ask about its use and approvals.

Certificates of Occupancy: When a building is first constructed, it is inspected and certified for occupancy. The local building approval authority grants the certificate of occupancy. From that point onward, the occupancy of the building must comply with the approval guidelines. It is possible that the certificate of occupancy can be withdrawn at any time if the building is deemed unsafe or has been damaged. It is, therefore, something that you would question if doubts about the building exist. In such circumstances, get a copy of the certificate of occupancy.
Development Approval: When property development considers the property, seek a copy of any existing development approvals. They will stipulate the type of development that has been approved, the elements needed to comply with the approval, and the timeline. Properties with existing development approvals may be attractive to purchasers that want to undertake new construction and property developments. You will also need to know if the development approval is transferable with the property to a new owner.

Disability and Discrimination Notices: Whilst the commercial property is simply a building constructed at a certain point in time, it is possible that it does not now comply with the current disability access codes and access provisions for buildings of that type. You need to know if any orders have been applied to the building by the building authority for compliance with new disability codes. If any orders exist, they will likely have to be discharged before any building sale or lease.

Electrical Services: All electrical services in the commercial property must comply with current standards of electrical installation and maintenance. In such circumstances, a contractor will normally be undertaking inspections and maintaining a logbook for this purpose. If in doubt (and particularly with older buildings), call in an engineer to advise. Thermal scanning of switchboards in older buildings is a good practical process to identify if matters of breakdown and heat could exist.

Electromagnetic Radiation (EMR): In some properties, EMR can be generated from plants and machinery (such as the power feed for lifts or mobile antennas on the roof of the building). This then becomes a safety issue for people on-site and also will be notable in the poor or erratic performance of sensitive electrical devices such as computers. When this problem is noted, it is necessary to involve engineers to advise you. It is also common for barriers to be installed in the area that is involved in EMR.

Environmental Risks: There will be a register of contaminated sites and properties that do not comply with the environmental guidelines in most locations. Ask about this when looking at new properties. The most common issues in this regard are tanks in the basement used to store heating oil or diesel. They may now be redundant, but they are regarded as an environmental risk and need to be remediated.

Essential Services Certification and Compliance: All buildings need to be compliant with fire safety regulations. This can include sprinklers, smoke detectors, smoke dampers, exit routes and signage, evacuation plans, fire hoses and hydrants, and the list goes on. Importantly all of these essential service systems in a building are regularly checked for compliance by qualified tradespeople. The results of the regular tests are maintained in logbooks on site. It is wise to question the compliance and checking process. It is something that can hold up sales and settlement.

Facade and Cladding: Given the large nature of commercial buildings, it is common for the property’s exterior sometimes to leak or fail. Deterioration is also an issue in older properties. Whilst you can do your own visual inspections, you are not an expert in building construction. Therefore it is sometimes necessary to call in an engineer to give qualified comments and guidance. The integrity of the building fabric will be of concern to the purchaser. In older rendered buildings, it is common for rainwater to penetrate cracks in the facade or walls and cause the render or the concrete to fall away. This process is called ‘spalling’ and, if noted, will require engineer comment. It is regarded as a risk to the public and people because are accessing the property.

Fire protection systems and compliance: Many property buyers will want to ensure that the property does comply with safety codes for building occupancy. Part of that will be formalised and operational systems such as building evacuation plans. It pays to ask the seller of a property to establish the evacuation plans and who is controlling the regular tenant drills and practices. This is highly important in a building with multiple occupants. In such circumstances, the landlord is responsible for establishing the plan and its integration into the tenant’s occupation. The lease for each tenant will also refer to their involvement with the fire safety systems and evacuation processes.

Geo-Technical Surveys: This will be more relevant with land and development sites, given that the property and building are still to be established or redeveloped. Has the property had such surveys undertaken? If so, what is the status of the survey and the report? If a property is located in an area that appears unstable or on sloping or rocky land, the report will be important to the property’s future. The geotechnical report can help with the understanding of construction costs and strategies.

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