Commercial Property Inspection: Everything You Need To Know

Purchasing new commercial property is a big investment for any company or businessman. As such, you have to approach it with due care to make sure you get your money’s worth.

And one of the most important steps is to hire someone to conduct a commercial property inspection, evaluate the building’s worth, and estimate any necessary repairs.

What does a commercial property inspection look like, who’s the best person to choose for the job, and what even is commercial property? We’ll answer all that and more in this article.

What is Commercial Property?

Starting with the basics, commercial property describes buildings and spaces built on commercial land with the specific goal of generating revenue. These can be generally divided into 5 types:

1. Office Spaces (coworking spaces, office buildings, etc.)
2. Retail / Hospitality (shopping centers, restaurants, cafes, etc.)
3. Multi-family Dwellings (condominiums, rental units, flats, etc.)
4. Land
5. Miscellaneous (sports facilities, warehouses, etc.)

What is a Commercial Property Inspection?

As mentioned above, a commercial property inspection evaluates the property’s true value, state, and necessary repairs. It’s traditionally carried out at the request of portfolio managers, who own and offer a wide range of similar assets for financial gain.

Thus, they’re typically interested in answering only two questions:

• How much will it cost to purchase and repair this property?
• How big of a return on investment (ROI) can I expect?

And to answer them, they need to know the current state of 5 property aspects:

1. Roofing
2. Structural Integrity
3. Electrical
4. Plumbing
5. Heating, Ventilation, and Cooling (HVAC)

By establishing the lifespan of each aspect and utility, real-estate managers can get a better understanding of the hidden costs they will have to put up with on top of the property price tag before they can start making a profit.

This includes things like repairs, utility upgrades, and so on.

Paper-based vs. Digital Commercial Property Inspection

While digitalization of work processes progresses, many organizations still use paper-based questionaires and checklists for conducting facility inspections.

But the benefits of digital forms creates a compelling option to improve productivity and quality in the industry.

The ability of digital tools to accelerate inspection speed, streamline report generation, and overcome limitations associated with traditional pen & paper process is expected to further extend its application scope.

For example NAI Significa, a global consulting company with experience in valuation services including real estate, increased their efficiency in inspections by 40% after implementing digital questionnaires.

“On average, we save 10 minutes on every inspection since there is no need for communication between the field inspector and the analyst in the office – leading to a 40% increase in efficiency. Now the field inspector just sends the answered questionnaire to the analyst, which only takes a few seconds” says Aljosa Nikolic, Analyst at Nai Significa

Who Conduct Commercial Property Inspection?

The first step to running a successful commercial property or facility evaluation is selecting a capable inspector to carry out the process on your behalf. There are two main groups between which management teams tend to choose:

Engineers / Architects:

Their value lies in being closely acquainted with the necessary structures and utilities. Engineers and architects have a keen eye for finding potential issues ahead of time and can provide the best, most actionable insights.

However, due to their seniority in the field, they sometimes charge a premium for their services. Combined with all other associated costs, this can make them unaffordable for smaller commercial property management firms.

Property Inspectors:

These can usually be sourced from companies specializing in inspectors and often offer both residential and commercial evaluations.

Property inspectors tend to be a little cheaper, but it’s best to look for a provider with a lot of experience in commercial inspections, as they’re quite unlike residential ones.

Regardless of who you choose to run your inspection, you should make sure they understand the fact that commercial properties are an asset that is both an expense and income generator.

Thus, they should be able to give you a clear and honest opinion on whether a specific real estate item is worth the money.

What Should be Included in Commercial Property Inspection?

The second step is the commercial property inspection itself. Its process can be divided into 4 parts:

1.) Utilities:

Utilities comprise the building’s five main systems – electrical, mechanical, heating, plumbing, air conditioning, and ventilation. Fire safety systems, sprinklers, and alarms are also grouped here.

Although seemingly minute, these systems are often a source of great expense, so the inspector must check they are all in working order, take note of any necessary repairs, and establish associated costs.

2.) Property Exterior

Consisting of outside walls, foundation, roofs, and all associated areas, including parking lots, this is perhaps one of the most vital aspects of the inspection.

With the help of construction and roofing experts, inspectors need to ensure the property is structurally sound and alert you to any potential hazards.

3.) Property Interior

The building’s interior needs to be assessed for potential safety hazards like the exterior. It also needs to follow local safety codes to ensure your business can operate without a hitch.

Thus, the inspectors need to assess the walls, ceilings, floors, and residential/office spaces. These fixes can turn into a significant expense.

4.) Documentation & Reportig

Finally, inspectors need to verify the building’s documentation to ensure everything is in order. This includes appraisals, building plans, citations, certifications, construction permits, emergency evacuation plans, etc.

Once all that is finished, the inspector’s findings will be compiled in a final property condition report (PCR). The report needs to feature all relevant findings and photographs for proof and clarification.

Report is an integral part of completed inspection. It provides a vital data for a client and inspecting company.

NAI Significa uses inspection reports for retrospective market evaluation.

“We capture all important data from the field – we make the complete tour of the real estate that we are evaluating, we take pictures, and information such as construction year, renovations, type of heating, etc. This data is crucial for us for several reasons. If we evaluate a building built in 2010, we will compare it with other buildings constructed in the same year. Our analysts incorporate all this information from the field into our reports,”
adds Aljosa Nikolic, Analyst at NAI Significa

Conclusion

And from there, it’s up to you. Save your money or turn a profit. Whatever you do, you do so thanks to the valuable insights of a commercial property inspection.

But should you choose to bite the bullet and make a purchase, you’ll need to take care of some repairs.

And that’s where commercial inspection software may come handy.