Landlords and Investors of all asset classes, listen up please!!!……….Construction and building permits are very important to obtain prior to any building improvements allowed to your asset.
When you replace the roof covering – you need a permit, facade renovation – you need a permit, tenant space build-out – you not only need a permit for the space improvement for occupancy load/class/type, use group and construction type but you will also need, accompanying permits for all MEP’s (mechanical, electrical, plumbing); and if applicable; sprinkler, fire alarm, boiler replacement, RTU (roof top unit) replacement, etc., as this short list of examples is not meant to cover all permit possibilities.
Building dental/medical/healthcare space?
No problem, but you will need separate and even more permitting for a myriad of things; vacuum systems, non-domestic plumbing, medical gas, nitrous oxide, X-Ray, air compressors themselves needs permitting, etc., and did you know, compressed air when used in dental/medical/healthcare is considered a medical gas so that is yet another additional layer of the onion that needs permitting- just to be clear NOT the onion itself.
You can run, but can’t hide
So many times when I take over a property, that has multiple vacancies, while auditing the available spaces I will inquire about the recent build-outs. I ask for copies of the “permitted drawings” and too many times I am told, “Oh that space? Well it was such a small renovation, we just hurried and knocked the work out”, or, “ the tenant was in a hurry, we didn’t have the time to go through the permitting process, we would have lost them so we hurried up and built the space out to get them in.”
As a seasoned landlord representative I understand the pitfalls and booby traps to steer landlords around during the lease up/asset development phase. Knowing what to look for now will save much effort in the future when selling the asset; yielding better returns. A smooth due diligence can mean a quicker and more sure closing. When representing a landlord in an acquisition and such permitting/occupancy documents cannot be produced, that equates to a significant “ding” to the value from my perspective. Below are a just a few examples that comes to mind of the many, literally hundreds of pitfalls possible.
- Means and Methods of construction practices used per the use group leased. Ex., (office tenant using retail space). Occupancy count per square foot varies triggering outside fresh air changes.
- Construction compliance to occupancy use groups (exits to close to be considered separate egress routes. During an emergency situation attempting to exit space could yield egress overload).
- Construction type compliance (using wood in a non-combustible building). Did you know “pyro” rated lumber has a total percentage allowed in non-combustible construction? A building can be significantly degraded falling out of its non-combustible construction status by using too much wood creating insurance requirements/premiums and possible cancellation if not corrected.
The money and time you think you are saving now by avoiding proper permitting and build-out practices WILL cost you exponentially on resale against an astute landlord representative. DO NOT allow a tenant’s inability to plan timely relocation become your emergency to accommodate same while devaluing your asset and possibly placing you in a high risk/liability situation. Hire a landlord representative that knows their way around asset development, that can orchestrate the process, that recognizes correct permitting, and that can get the property leased up on terms and time lines favorable to YOUR future portfolio valuation.
I will have many blogs regarding this subject in the future; the many pitfalls of asset development and how to identify them. Please watch for future writings linking from this original post.
Wishing you great success,
Brent W. Sears, CCIM SIOR