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Industrial Building Conversions

We are looking for a small office building to buy for our professional practice. Our broker is suggesting that we buy an industrial building and convert it to an office building. Is this practical?

As property values have risen on Long Island, particularly in Nassau County, the highest and best use of properties has often changed. So a well-placed industrial building may indeed be a candidate for conversion. And it may also be a pitfall for the unwary! So let’s take a look at some of the factors involved in a conversion and how practical it may be.

One of the first concerns I have is parking. Many older industrial buildings were legally built with a parking ratio of “two to one.” This means that there were two parking spaces allocated for every 1,000 square feet of building area. This would be woefully inadequate for any sort of office use, and would not meet any modern building code for office use. An office building is often required to have a parking ratio of five to one, nhà công nghiệp and sometimes more. So in most jurisdictions, a 10,000 square foot office building would need at least 50 parking spaces. So the office conversion candidate probably needs an oversize plot, or an adjoining plot that may be acquired. Or, the economics may actually justify demolishing part of the existing structure to create additional parking.

Zoning in many areas actually allows office buildings to be built in an industrial zone, “as of right”, meaning that a zoning variance will not be required for a conversion. But this is not necessarily so. The actual conversion will require building plans, and probably a new site plan, both of which will need to be approved by the local jurisdiction. But this is relatively minor compared to the time and expense of a change of zoning, or obtaining a special use permit.

The surrounding properties are also a consideration. I would have little concern about an office conversion if the property were located in well-maintained industrial and research park. But the resale value of your office conversion may be a problem if it is located next to heavy industrial manufacturing or a scrap yard!

Know your construction costs before committing to the project! These costs are highly dependent on the actual structure you are considering, so avoid averages or “ball-park” conversion estimates. You cannot afford to negotiate on the existing building without knowing your total cost, which includes acquisition, conversion, and soft costs.

Two other quick caveats: The industrial building will have taxes that seem low by office standards – that will change when the building is assessed! And don’t forget to factor in the time and effort that it will take to supervise, or live through the conversion process. A typical industrial conversion would probably take no less than six months, and could certainly take up to year including filing and approvals.

Properly done, an industrial conversion can be outstanding buy, and I can point to many examples on Long Island. But the process requires exhaustive research, which is best done by an architect whom you have hired long before you go to contract!

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