Commercial properties are one of the most profitable business assets in the world right now.
According to a survey, the worldwide commercial real estate industry was estimated to be worth over $35 trillion in 2022.
It was up by around a trillion US dollars as compared to 2021’s estimated value of approximately $34 trillion.
This means that renting or leasing real estate generates a big chunk of the world’s wealth.
However, it’s not as easy as it sounds.
Before you can even rent or sell your commercial property, you have to make sure that it is safe and up-to-market standards for your client to operate in.
To overcome this obstacle, we opt for commercial building inspection.
In our earlier articles, we have discussed basement and attic inspections, but commercial property inspection is a whole other deal.
Not apples and oranges different, but still different.
Since they differ so much, it is reasonable that they get billed differently, too.
There are several methods that are mostly used to determine the commercial building inspection cost, but we will discuss that a bit later.
First, we need to understand what a commercial building inspection is, its scope, and the various factors that influence commercial building inspection cost.
Understanding Commercial Building Inspection
Simply put, a commercial building inspection is a test, an evaluation of a building/property that is commercially used.
These commercial properties could be anything. It can be corporate offices, cafes, warehouses, and even residential units. The list goes on.
As long as the property is used for commercial purposes, it is identified as a commercial property.
Ideally, we should perform a periodic commercial building inspection, but they are only mostly conducted when you are in a buying or selling process, or it is the end or start of a tenancy.
Importance of Commercial Building Inspection
The purpose of these inspections is simple, to identify any problem with the property. It could be structural, electrical, or anything.
If there are any such issues, they need to be dealt with as soon as possible.
Why, you ask?
The answer is simple, it is bad for business. That and there are laws in place that require commercial property owners to do so.
Suppose you own a commercial property that a start-up tech company is looking to invest in to use as their office.
Now, if there are any issues, such as a problem with the HVAC system, it would be a huge inconvenience for them. And in return, it would also be a huge problem for you.
When you get in a meeting with them to negotiate a deal, these issues will not be in your favor, and they will drive down your property’s rent.
So, we could also say that these inspections aim to drive profits from rentals or business operations.
This goes hand in hand with what the International Association of Certified Home Inspectors (NACHI) has to say about the purpose of a commercial building inspection.
They state, and we quote,” Although the Standards are available and extremely useful, the goal of a commercial inspection is to provide the client with the information they need to enter into transaction negotiations with as much power in their possession as possible.”
Apart from its monetary aspect, it also serves another purpose, and it might be the most important aspect for you.
It ensures the safety of all parties involved, especially those who operate in the building.
Commercial property inspection also inspects the foundation of the property. If the foundation is not in good condition, it is bad news for everyone.
A bad foundation can cause the property to collapse, which would endanger the lives of everyone operating in the building.
With inspection, we can detect it early and make any required repairs.
We are not saying that commercial property inspections save lives, but it does help you mitigate risk and give you the tools to protect your property from any mishap.
Methods To Calculate Commercial Building Inspection Cost
So, how much does a commercial building inspection cost?
Based on the benefits you get from a successful commercial building inspection, how much it costs matters very little.
However, you still have to foot the bill. So, it is better to get an idea rather than going in blindly.
To get an estimate, you first need to understand the baselines and factors influencing the commercial real estate inspection cost.
For example, large commercial properties, like warehouses, would be relatively larger in size, which means it would require more time to get a thorough inspection, which would naturally result in higher commercial inspection costs.
Whereas, if the space is small, like a cozy cafè, it would cost around the same as a residential inspection.
Now that we are done with this, let’s focus on the methods.
Well, there isn’t any method that suits each and every circumstance. So, it goes without saying that there are various methods to remedy this unpleasant event.
There are four most used methods to get an estimate of commercial building inspection costs. There are other methods as well, but these work the best and are widely accepted.
We are sure that you are already familiar with this method, but for the peace of our mind, let’s revisit this ally.
So, as the name suggests, the inspector charges by the hour. Nothing more to it.
The longer it takes the inspector to inspect the building, the higher the commercial real estate inspection cost goes. Similarly, if the space is comparatively small, it would mean less time invested and lower inspection costs for you.
According to the Certified Commercial Property Inspectors Association (CCPIA), the average hourly cost of a commercial property inspection is around $300/hr.
So if we take that as our benchmark, we can say that if you hire an inspector at an hourly rate of $300/hr and it takes them 3 hours to inspect the property, it means your commercial property inspection cost would be $900.
Remember, it is just an average. It can cost way less or way more based on the qualifications of the inspector, location, and various other factors.
Cost Per Square Foot
It is one of the simplest methods. Not as straightforward as the hourly rate but close enough.
In this method, the cost of inspection is directly influenced by the size of the property.
The inspector has a pre-set cost per square foot. The larger the property, the bigger the cost.
Additionally, there can be subset prices too. It means that the inspector might charge you differently based on the type of property.
For example, the inspector charges $0.05 per square foot if it is a warehouse and $0.08 per square if it is an office space.
Let’s elaborate on this with an example.
Imagine the property you want to get inspected is a 20,000 sq. ft. commercial building with 5,000 square feet of office space, and it also offers a 15,000 square feet warehouse to store the business’s products.
Assuming that the inspector charges $0.07 and $0.05 per square foot for office space and warehouse, respectively, the total cost of the inspection would be:
Cost the office space: 5,000 x $0.07 = $350
Cost the warehouse: 15,000 x $0.05 = $750
So, the inspection would cost you around $1,100, excluding external factors.
The best part is, with this method, you don’t have to worry about the inspector purposely taking longer to finish the job just because they are getting paid hourly.
We are not saying they do, but even if they wanted to, they simply can’t.
Sale Price Percentage
This method is a bit complicated compared to others but not that hard to understand.
Sale price percentage is a great method when you are dealing with extremely large projects.
Large projects simply translate to large property sizes, like warehouses, and shopping centers, which means that going with the hourly or cost-per-square-foot approach isn’t really an option.
So, how does it work?
That part is simple, actually. You hire a contractor/inspector to get the property thoroughly inspected. And you pay that contractor a percentage of the amount you sell the property for, like 1-2%.
The percentage you and the contractor would have to decide based on the scope of the project.
The complicated part lies on the inspector’s end.
Since the scope of the project is obviously great, they would assemble an inspection team with various experts to handle different tasks.
You don’t have to worry about paying these experts as the contractor you hired would take care of it out of his cut in the deal.
Let’s use an example.
Imagine you are selling a corporate office building that is 400,000 square-foot in size. But before you can close the deal, it needs a green flag commercial property inspection.
You hire an expert and agree to pay him 1%. Now, the expert would hire a team, manage everything and get the job done.
Now, let’s say you close the deal on $18 million, which means you would have to pay $180,000 to the inspector.
It is clear as day that that is a fairly high sum of numbers, and it’s no secret that the sale price percentage drives up the commercial building inspection cost.
However, it is a longstanding approach, and in most cases, it is worth it as long as it is a really big project.
So, you would have to carefully evaluate all the factors and decide whether this is the right method for you.
The flat fee method is very simple.
The first step, you contact an inspector, and they would assess the property.
Then, based on the type, size of the property, and the amount of time it is going to take them to thoroughly inspect it (possibly some other factors as well), they will come up with a number that you have to pay.
Now, how much they are going to charge depends on the inspector and the property.
It is as simple as that.
For reference, $350-$450 for a 1,200-square-foot property isn’t unheard of.
But there is one catch.
This method is not easily available.
In most cases, it is only available when you have multiple similar projects in the pipeline that the inspector can work on.
Take residential units for an example.
Imagine you own a residential unit and want to get all the condos inspected.
Typically, all the condos are mostly similar. They would have similar roofing, HVAC systems, etc.
Since their structure is so similar, their inspection cost would be similar as well.
In such cases, the inspector would come up with a flat fee for each condo or each residential unit if you are in the market to get multiple residential units inspected.
Commercial Building Inspection Checklist
So far, we have explored commercial building inspection and the methods used by the inspectors to bill it.
Now, let’s visit a different but very important avenue, the commercial building inspection checklist.
With a commercial building inspection checklist in your hand, you can verify that every aspect of your commercial property is thoroughly inspected.
In a commercial property inspection, the property is typically divided into two categories, interior and exterior of the property.
First, let’s cover the interior of the building. So, during an inspection of commercial property’s interior, these elements are typically included:
- Structural Frame
- Fire Protection Systems
- HVAC Systems
- Plumbing Systems
- Moisture and Water Intrusion
- Pest Infestation
- Radon Gas
- Air Quality
- Electrical and Mechanical Systems
- Doors and Windows
- Kitchen Area (if included in the property)
- Storage Space
- Life Safety Measures
- Any other aspect specific to the property
Meanwhile, the exterior of the property typically includes:
- Building Structure
- Parking Space
The inspector’s job is to analyze/test all these elements and ensure that they are well maintained and working fine, as they are supposed to.
If they find any issue with anything, like if they find that the plumbing system is not working efficiently and is in need of a repair, they will suggest necessary repairs for which you would need to hire a separate contract.
In addition to these aspects of the commercial property, the inspector also reviews some documents related to the property to make sure everything, the floor plan, for example, is followed properly and is in order.
These documents typically include:
- Building Plans
- Floor Plans
- Evacuation Plans
- Construction Permits
- Occupancy Certificate
- Relevant Surveys
With all these elements evaluated and given a green light by the inspector, you are good to go to rent or sell your commercial property.
Now that we are done with this, only one question remains: what are the qualifications you should consider when hiring an expert to inspect your commercial property?
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Qualifications To Consider When Hiring A Basement Inspector
As you must has realized by now, a commercial property inspection is no walk in the park.
It is a very important and difficult task; not everyone can do it.
So, you have to make sure that the person you hire is right for the job.
To make things a bit easier for you, we have compiled some key points you should consider while hiring an inspector for your commercial property inspection.
Here are those key points:
Certification and Licensing
The first thing you need to check for is that the inspector is certified to practice in your area.
Most areas/jurisdictions require inspectors to have certain certifications and licenses to practice in the area, and it is in your best interest to make sure that the inspector you choose meets these requirements.
Knowledge and Training
This is a no-brainer. Like any other job, you need to make sure that the inspector you are hiring is qualified for the job.
Inquire the inspector about their training and educational background. Make sure that they have completed the required course and gone through extensive training.
In addition to this, the inspector must also have extensive knowledge of commercial construction, building codes of the area, and systems in a commercial building.
These systems include HVAC systems, electrical systems, plumbing, etc.
If the inspector is continuing their education, it is a green flag as it suggests that the inspector stays updated with the latest norms and latest industry practices and standards.
Experience and Expertise
This goes without saying that you should always opt to hire an inspector who has been working in the industry for a long time and has already conducted a number of inspections in his career so far.
The reasoning behind this is simple. An experienced inspector is more likely to come across a number of issues and is more capable of identifying potential issues in different types of commercial properties.
If the inspector is actively affiliated with inspection-related professional associations, such as Certified Commercial Property Inspectors Association (CCPIA), it suggests that the inspector is committed to professional standards.
Insurance and Liability
Unfortunately, accidents do happen, and sometimes there is nothing you can do to avoid them.
However, what you can do is make sure that the inspector carries appropriate insurance coverage.
A reputed commercial inspector typically carries errors and omissions (E&O) insurance.
E&O insurance, also known as professional liability insurance, covers the inspector and their clients if there are any mistakes or omissions during the inspection.
There is also commercial general liability insurance which, as per the Insurance Information Institute, covers any accidental damage sustained during the inspection.
Reviews and References
It is exactly as it sounds. Before settling on the inspector, go online and check the reviews they have received.
You can also ask the inspector for any references they might have received from their previous clients.
With this, you can get some insight into the inspector’s professional standards and work ethics.
Last but not least, you can also request the inspector some sample reports of their work.
With this, you can get an idea of their thoroughness and clarity in documenting their findings.
Make sure that the sample report thoroughly details the issues found during the inspection with clear photos and recommendations to address those issues.
Keep in mind that the report should be easy to understand and provide a detailed overview of the building’s condition.
We know that these are a lot of steps and feel like a drag.
But remember, it is an investment in your commercial property and your business.
Surely, this is a lot of work, but it makes sure that you find the right professional who is capable of conducting a thorough and accurate inspection of your commercial property.
Before we conclude this guide, let us revisit some of the key points that we have discussed so far:
- Commercial building inspection is essential to ensure a property’s safety and market standards for commercial purposes.
- The commercial building inspection cost varies based on factors like property size, type, and inspection method used.
- The four commonly used methods to calculate commercial building inspection costs are hourly rate, cost per square foot, sale price percentage, and flat fee.
- A commercial building inspection checklist includes evaluating the interior and exterior elements of the property, as well as reviewing relevant documents.
- When hiring an inspector, consider their certifications, knowledge, experience, affiliations, insurance, reviews, and sample reports to ensure a thorough and accurate inspection.
- Investing in a professional commercial building inspection is an important step to protect your property and business interests.
After all that we have discussed, one thing is clear.
Choosing the right commercial property inspector is as important as the inspection itself.
It all depends on the inspector. If they are great at what they do, you can relax knowing that your property is in the right hands.
However, if the inspector is not experienced or qualified enough, well, to say the least, that can have consequences.
Well, in such situations, you can give us a call.
We Can Help
We at Souffront Construction & Engineering (SCE), with our years of experience in the industry, offer commercial inspection services at competitive prices.
Our team of credible inspectors has all the right credentials and a wealth of experience in the commercial inspection industry to leave no stone unturned and conduct a thorough and inspection of your commercial property.
We understand the importance of clear communication and transparency.
Our experts don’t just provide a detailed inspection report. We also take the time to explain the report, the issues we found during the inspection and recommend the methods you can use to address them. We are specialized in 40 year structural recertification.
However, that’s not all.
We take great pride in the fact that you can trust and rely on us. And that is not something that we claim, but our extensive portfolio of clients.
However, when all is said and done, our philosophy is to prove our worth through results, not mere claims.
So, contact us today for your commercial property inspection needs and see for yourself.
John Souffront is a seasoned leader in the construction and engineering industry, with over a decade of experience at the helm of Souffront Construction & Engineering. Known for his unwavering commitment to excellence and innovation, John has propelled his firm to the forefront of the field, delivering cutting-edge solutions for complex projects around the country.