Los Angeles is a treasure trove of older commercial buildings, sometimes hitting the market for a bargain (at least in the eyes of a savvy investor). But even veteran investors can overlook a key factor deserving of anyone’s attention when putting money into older commercial properties. No, we don’t mean location. Or keeping a healthy variety of tenants. We’re not even referring to income potential. Today, we’re reminding you of the importance of assessing construction materials when purchasing older buildings. The materials used to build these older buildings often impact everything from operating costs and compliance to renovation potential and overall investment performance. Therefore, it behooves you to know the “ingredients” in what you’re buying.
Hazardous Construction Materials in Older Buildings
Let’s start with the most obvious point: that a lot of these older buildings incorporated hazardous construction materials that don’t meet the standards of modern compliance. Common examples of construction materials that may fail to meet local building codes include:
- Asbestos – Once a major ingredient in insulation, flooring, and fireproofing, asbestos was eventually found to pose a serious health hazard, leading largely to its discontinuation as a building material in the 1980s. Remediation is typically not required in California. However, disclosure to tenants and ongoing regulation are par for the course.
- Lead-Based Paint – If you’re buying a commercial property that was built before 1978, chances are good that lead-based paint is among its construction materials. Lead paint has been found to be especially dangerous to developing children.
- Obsolete Electrical/Plumbing Parts – A number of obsolete components, including aluminum wiring and galvanized pipes, can cause you investment headaches – and maybe even some pricey upgrades.
If you’ll need to cover the cost of retrofitting, remediation, or upgrading, it’s best to know as soon as possible. Therefore, you can’t afford to overlook any potential investment’s construction materials.
Commercial Construction Materials That Consider the Long Term
The construction materials that go into a commercial building can also inform its maintenance costs over the years. Obviously, higher-quality materials with longevity offer more value than cheap materials slapped together with only the short-term in mind. Here are a few examples of composition pitfalls to avoid in your investments, if possible:
- Obsolete Roofing Materials – Older roofs stand a better chance of leaking, which can saddle you with costly repairs.
- Single-Pane Windows – Windows that use just a single pane of glass often lead to higher HVAC costs due to their energy inefficiency.
- Wood Framing – Check wood framing in older construction to ensure it hasn’t been compromised by termites or wood rot.
On their own, these issues wouldn’t break an investment. But when planning your budget, it’s important to note these elements in order to give you the most accurate picture moving forward.
What to Know if Considering Renovation of an Older Building
If a renovation is part of your plan, it’s doubly important to familiarize yourself with a property’s construction materials. Some points of particular consideration include:
- Aesthetics – Some popular construction materials in older buildings, such as brick masonry, terrazzo floors, and exposed timber beams, can actually be incorporated into adaptive reuse projects for a chic aesthetic that boosts value.
- Modern Integration – However, it can be a painstaking (and pricey) process to retrofit HVAC systems, data cabling, and sprinklers into older buildings.
- Structural Setbacks – Some buildings are more difficult to upgrade than others. For example, a building with unreinforced masonry may not be suitable for expansion with additional floors or intense layout changes.
It pays to get a full understanding of which construction materials can be effectively restored or replaced in an older commercial building. Above all, this foresight helps you to align your budget with market expectations.
The Importance of Due Diligence in Property Investment
It’s also important to understand what construction materials were used in your investment because you won’t be the only person paying attention. Insurance companies and lenders tend to factor materials into their underwriting when determining your building’s insurance policies and mortgages.
If your investment’s construction materials are considered hazardous or contribute to structural risks, you can expect insurance premiums to rise or coverage to be restricted. Some lenders may also deem it necessary for you to fulfill an environmental report or a Property Condition Assessment (PCA) before they authorize coverage. By doing your due diligence early on, you may be able to skirt delays, financing blockades, and unwanted surprises further down the road.
Construction Materials Matter
It can be easy for an older building’s construction materials to get lost in the details. But these are fundamental building blocks (literally) of your investment’s overall longevity and risk profile. So make sure you know what you’re getting into – especially when a renovation or repurposing is a strong possibility.
