Do you want to learn more about commercial property terms? If you want to increase your knowledge about commercial property terms used in the industry today, check out this article.
If you currently invest or are considering investing in commercial
real estate, here are a just a few more commercial property terms that
you should be familiar with.
Clear Span
Clear span means no columns, posts, or anything else that might impede
traffic. This relates to more specialized buildings, such as at the
airport. Those buildings are not just for airplanes, but more for
companies like Emery Air Freight and UPS. They’re interested in how
quickly they can get into a building, get the package, and get it out of
the building—no matter where it is in the warehouse. That means that
they will be looking for greater clear span areas. It’s a more expensive
space, because of the trusses. The greater the clear span, the more
expensive the truss work, and the more engineering that has to go into
the building.
Tips:
• Some companies require a tremendous amount of clear span
• Unless you understand the industry and marketplace, stay away from it.
If you’re getting into this specialty area of real estate, someone may
ask you if you have any buildings with columns every 20 feet and lots of
clear span. They may even expect you to be able to clear a couple of
columns, which may involve major engineering issues. So, if you’re
considering entering into a specialty product or a specialized industry,
be careful.
Anytime you’re dealing in the warehouse arena, always consider these elements:
• Column spacing
• Bay depth
• Clear span
Ceiling Height
Today, people favor higher ceiling heights, especially for pure
warehouse space-type property usage. It increases cubic capacity,
because the cheapest way is stacking and racking. If you can stack 20
feet high instead of 10 feet, it effectively doubles usable area, but
does not double cost.
So keep ceiling height in mind as you evaluate warehouses to acquire
versus other similar properties you may be considering. The higher the
ceilings, the more appeal to certain kinds of storage-oriented tenants
(just be sure to point it out to them if you do in fact have much higher
ceilings than similar properties available for lease!).
Functional Obsolescence
Some buildings are Class B buildings on the day they open because they
don’t measure up to previous Class A buildings. Class A buildings will
have no functional obsolescence— in other words, nothing in that
building is considered old-fashioned or outdated. Most Class B
buildings, and all Class C buildings, have functional obsolescence.
Functional obsolescence is not easily determined. For example, if you
enter a building and go into the elevator, you’ll notice immediately if
the elevator is three feet by three feet—that’s functional obsolescence.
It’s claustrophobic and the novelty of the elevator was okay to have 40
years ago, but it’s no longer acceptable.
When that office building was constructed, the functional obsolescence
of that elevator was literally cast in steel. You’re not going back and
rehab that elevator to make it bigger, because it’s impossible. That
elevator shaft was built with poured-in-place concrete, so removing the
elevator might cost as much as rebuilding. You can install a new
elevator that’s bigger at great expense, but you can’t make an elevator
bigger. That’s how you measure a building’s functional obsolescence
looking for obvious things like elevators that can’t be changed.
Learning commercial property terms is not difficult. You just need to
understand them as they relate to the industry. Taking the time to
learn them will help you become more knowledgeable in this real estate
industry.
One
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Gary
began his real estate career in Honolulu in 1966, selling land and
homes as head of one of Hawaii's largest brokerages, and has now sold
and leased real estate in Idaho, Virginia, Puerto Rico and Florida. For
the last 30+ years Mr. Tharp has been one of the leading commercial
investment real estate brokers in Orlando, Florida and a nationally
known mentor. Gary is widely regarded in commercial real estate, having
developed tools and systems of commercial property evaluation that have
become industry standards used by professionals nationwide. With
development experience ranging from office buildings to industrial
parks, Gary is Florida Partner for the Lynxs Group, national developer
of air cargo facilities, Fellow of the faculty of the CCIM Institute,
and Board of Advisor with HIS Real Estate Network, a residential and
commercial buying group.
