Does a failed conversion appraise above or below land value once it's been partially demoed

The partial demo almost certainly hurts the land value compared to leaving the building intact, and here is why.

A vacant but intact 1940s masonry building still has option value. A buyer can assess the structure, decide to convert it, and start from a known baseline. A stripped shell changes that calculus because whoever buys it now inherits sunk demo costs they did not control, an interior they cannot evaluate the way they would an untouched building, and potential structural unknowns from whoever did the work. The broker calling it "value-add" is technically accurate in the sense that work remains to be done, but that framing skips the part where the partial work may have created new problems rather than solved old ones.

On the appraisal question specifically: how a lender or appraiser treats it depends on what the highest and best use is now. If the remaining shell has no realistic conversion path, the appraiser may fall back to land value minus demolition cost, meaning the land is worth less than raw land because the buyer still has to pay to clear the structure. That is the outcome you are worried about, and it is a real one.

The number I would want before going further is a structural engineer's assessment of the remaining shell. Whoever stopped mid-job may have left the masonry compromised, or it may be fine. That report changes the entire conversation because it tells you whether the building is still an asset or has become a liability sitting on the site.

I would also want to know why the previous buyer stopped. Permit issue, financing, entitlement problem, or something they found inside? That answer often tells you more than the building does.

What does the broker know, or claim to know, about why the project stalled?

Whether it hurts or helps depends almost entirely on what the highest and best use analysis says the land wants to be, and the building in its current state is interfering with that answer in two directions at once. If the zoning and market support a ground-up industrial or mixed-use project, the partial demo may have saved you one line item, specifically the demolition cost to reach a cleared pad, which means the structure has negative contributory value and the land value should theoretically be recoverable once you subtract that remaining demo cost. The problem is that "theoretically" is doing a lot of work here, because a partially demoed masonry shell also carries unknown environmental liability, potential structural compromise from weathering after the envelope was breached, and carrying costs the previous owner already proved they could not sustain. An appraiser using the sales comparison approach will struggle to find comps for a half-gutted 1940s plant, so expect cost approach to dominate, and expect that appraiser to be conservative about the depreciation schedule on a building that is now actively deteriorating rather than just aging.

What I would confirm before acting: get a Phase I and a structural assessment, in that order, because the mechanicals being stripped means any environmental concern from the former printing use is now potentially mobile through the building rather than contained, and confirm with the county assessor whether the demo triggered a reassessment event that affected the tax basis, since two years of carrying at a higher assessed value than the asset justifies is a negotiating point the seller may not have priced in. The broker's "value-add" framing only holds if the remaining structure has positive contributory value toward the intended use, so what is the intended use you are underwriting to?