Deciding whether an $85k feasibility study is worth it before buying an 8 story office building for conversion

Worth asking who is paying for this first pass, girder. The work you describe is the exact scope the $85k study is supposed to cover, and the group is getting it for the price of a favor.

Floor plate depth is the first screen most conversion underwriters apply, and the rule of thumb people work with is roughly 30 to 35 feet from the exterior glass to the corridor wall. Beyond that you are building units with unlit interior space that has to be absorbed as a den, a walk in closet or dead area, and every square foot of it is area you paid for and cannot rent at full value. A 65 foot bay on one side of an off center core does not automatically kill the building, and the fixes are cutting a light well, accepting deep single loaded units, or using those floors for something other than apartments. Each fix costs rentable area or money.

The $85k question is really a question about sequencing. There is a cheaper step between where you are and a full test fit. An architect who has done conversions in your jurisdiction will usually do a limited feasibility screen for a fraction of that, covering plate depth against local light and ventilation requirements, whether the existing egress stairs support residential occupancy counts, and whether the plumbing core can serve a double loaded corridor. If the screen says no, you saved most of the money. If it says maybe, the full study is being spent on a live building instead of a hopeful one.

One thing to confirm rather than assume. Light, air and egress requirements for residential conversion vary by state and by city, and some jurisdictions have adopted specific conversion provisions that others have not. Get the applicable code section in writing from the local building department before anyone prices a unit layout.

For a passive investor reading a conversion deck, this thread is useful for a different reason. Sponsor decks almost never mention floor plate depth. If a 65 foot bay can move the outcome this much, it belongs on page two.

What is the core. I have read it four times in this thread and I think it means the elevators and stairs in the middle, but I want to be sure before I keep going.

Rigging, yes, the core is the stack of elevators, stairs, restrooms and shafts that runs vertically through every floor. Girder, the question worth coming back to is why convert rather than build new on cheaper dirt. Your $290k a unit is not obviously below the ground up number in most secondary markets. The answer is usually the location, so what does this site do for the group that a greenfield parcel would not?

Your 800 amp service is the item to price this week, girder. Take a much smaller reuse, a two story former medical office turned into six units. A utility upgrade on a project that size can come in around $118,000 with a nine month lead time on the transformer, and that is for six units. Scale that thinking to 100 and a new service, new vault, new house panels and metering for every unit is a real line item rather than a rounding error. Ask the utility for a written service availability letter early, because their schedule is the one thing your GC cannot compress.

Twenty five years of pipe in commercial buildings and I will tell you what decides this before the architect does. Find the existing waste stacks and draw them on the plan. A 1974 office has one or two wet cores serving restrooms, sized for that, and everything else is dry. You are now asking for 100 kitchens and 100 bathrooms, which means new stacks and a lot of horizontal drain running above ceilings with a slope of a quarter inch per foot. On a 120 foot deep plate, a fixture at the far end of a run needs 30 inches of fall to reach a stack near the core, and you do not have that ceiling height to give.

So the practical test is whether you can locate new risers so that no unit's plumbing runs more than about 25 or 30 feet horizontally. That means stacking bathrooms and kitchens back to back and floor to floor, and it means every unit layout on all eight floors has to line up. If the structural bays fight that, you are coring hundreds of holes in a flat slab, and each one gets x rayed for post tension and rebar first.

Two more things from experience. A 1974 building will have asbestos in the floor tile mastic and probably the pipe insulation and fireproofing, and abatement is priced by the square foot of what you disturb, so a full gut is the expensive version. Have someone pull a real hazardous materials survey with samples before you talk about $255 a foot, because that number is either fine or off by 15 percent depending on what the lab says.

My answer on the $85k. Do not spend it yet. Spend two or three thousand on a plumber and a structural engineer walking the building with you for a day and marking up the existing drawings. If the risers can be made to work and the slab will take coring, then pay the architect. If they cannot, you saved the group $82,000 and yourself a hard conversation.

Solder's version of the same question is a day of walking the building versus $85k of drawings. That is the right order on any building a group is thinking of buying.

Deep interior space becomes a leasing problem that repeats for years. Units with a windowless second bedroom turn over faster and sit longer between tenants. They also lease with more concessions. If half your 100 units have that layout, your economic vacancy is running 2 or 3 points above the market, and the pro forma almost certainly used market. Ask the group what vacancy they carried, and whether they carried a different number for the deep units.

How long would 100 units take to lease in this market. If the local absorption is 12 a month you are fine, if it is 5 you are carrying construction debt through a 20 month lease up and that interest belongs in girder's $29m.

Worth knowing what the land alone is worth under it. If a demolition and dirt sale gets the group most of $4.2m back, the downside on a failed conversion is bounded, and that changes how much they should be willing to spend finding out. Demolition on an eight story concrete frame is not cheap though, so get a number rather than assuming.

Girder, a question about you rather than the building. If the group buys this, are you the GC or an investor, or both? Doing the feasibility work for free, taking the construction contract and holding equity puts you on three sides of the same table, and the group should decide whether they are fine with that before anyone spends $85k.

One thing that keeps coming up in everything I read is that conversion economics often only close with some form of public support, whether that is a tax abatement, a historic credit if the building qualifies, or a reduced parking requirement that saves a garage. Girder, has anyone checked what the city offers for conversions. Those programs vary enormously by jurisdiction and change, so it needs confirming with the city in writing rather than from a blog post, but a 10 or 15 year abatement is the sort of thing that moves your $26m of value against $29m of cost into a different conversation.

On a smaller conversion project, the note worth keeping in mind is what breaks later. Odd unit layouts cost more at scale in ways nobody underwrites: non standard cabinet runs, one off blinds, weird HVAC zoning for a room with no exterior wall. Every one of those becomes a maintenance line and a longer turn. On a hundred units of a conversion, a higher per unit expense number than a new build is the safer assumption, and a $9,500 per unit estimate already looks thin against that.