Now is the time of year where many companies are cleaning house. Auditing departments are analysing and assessing inventory, and looking for ways to minimise losses – kicking off the New Year in stride! Unfortunately, during this process many building owners and managers overlook the main driver of their revenue – the very square footage upon which leases are based.
It has become increasingly common for building owners and managers to rely on historical figures when selling or purchasing a property. Many put their trust in building and unit sizes that have been carried forward for years, or even decades. Considering building revenues and overall property values are directly correlated to building size, wouldn’t you want all of your ducks in a row before purchasing or selling a property? In other words, when making an investment decision, why rely on areas that have not been certified?
Space certification is more than just an independent, third party confirmation of the size of an existing space. It can also be a crucial vehicle for unlocking additional property value.
Recently one of our clients was in the process of negotiating the purchase of a large multi-tenant industrial building. The owner provided our client with the overall building area together with segregated unit areas. The owner had openly stated the areas had not been measured in at least ten years and so prior to making his final investment decision, he engaged our Lasercad® team to verify the areas with a space certification of the building. Once the tenant spaces were measured and the rentable areas calculated in accordance with the appropriate standard method of measurement, we came to an astounding conclusion. Our space certification rendered a total rentable area which was more than 10% higher than the owner-provided areas! The building area had been understated for the past 10 years (or more). From an investment standpoint our client was floored. Based on the current market rates for the area, the owner had been losing out on approximately $35,000 per year of additional revenue. The potential revenues which could be realised from the previously understated building size played a major role in determining the overall value of this multi-tenant industrial building.
Although some building owners and managers may overlook the source of their building and unit sizes, many others have been pro-active in implementing space certification as a standard procedure – especially when making investment decisions. Regardless of whether you are buying, selling, or leasing, it is essential to know where the underlying areas originate from. The square footage of your building is typically the core revenue driver and often times, these areas are understated. Now is the time to get a grip on your inventory and ensure you’re maximising its value.
Patrick Mitchell is the Senior Manager of our Lasercad® Division and also highly involved in our Valuation Division. For further information on how to maximise your property’s value through space certification please don’t hesitate to reach out. Patrick can be reached at by phone at 902-429-1811.