Commercial property inspections

Property condition assessment

The ASTM E2018 standard describes a baseline property condition assessment (PCA). The consultant walks the site, reviews documents, interviews people who know the building and produces:

• A description of the building and its systems.
• Observed deficiencies.
• An opinion of probable cost for immediate repairs and for items expected over a short-term horizon.
• Often, a reserve table projecting replacement costs over 10 to 12 years for lenders.

Systems typically covered

1. Site: paving, drainage, landscaping, lighting, signage.
2. Structure and building envelope: foundations, framing, walls, windows, roofs.
3. Mechanical, electrical and plumbing.
4. Vertical transportation, if present.
5. Life safety and fire protection: sprinklers, alarms, exits.
6. Interior finishes in common areas and a sample of tenant spaces.

Things that change the scope

• Number of tenant spaces sampled. Access to occupied units must be arranged.
• Roof access on larger buildings.
• Document review: certificates of occupancy, fire inspection reports, open permits and code violations.
• Specialist add-ons: infrared roof scan, elevator inspection, sewer scope, seismic risk assessment (probable maximum loss studies are common in California).

Environmental is separate

A Phase I Environmental Site Assessment, under ASTM E1527, looks for recognized environmental conditions such as past use as a gas station or dry cleaner. Lenders usually require it in addition to the PCA. Asbestos and lead surveys may also be needed before renovation.

Small commercial buildings

For a small retail building, office condo or mixed-use property, a full PCA may be more than the deal needs. A scoped inspection by an experienced inspector, combined with specialists for the roof and HVAC, can be a practical alternative. Agree in writing on which systems, which spaces and which deliverables are included.