A commercial real estate inspection forms a critical part of the due diligence process for any investor or manager of commercial property. The regulatory environment for real estate—both for existing buildings and new development—is increasingly rigorous. Energy and sustainability remain focal points for public policy, with standards changing constantly.
So what do organizations need to do to meet government requirements in the United States for their commercial properties?
Common Requirements for a Commercial Real Estate Inspection
Building inspections are fairly common in commercial real estate. They help an investor or building manager collect data on structural quality, capital investments and building code conformity, among other things.
A wide variety of regulations and compliance requirements governing building inspections. These include factors such as engineering, safety, environment and accessibility. Generally, inspections are needed:
- When there is a substantial change to the physical structure of land or buildings
- When there is a change in ownership
This is usually done during the purchase, renovation or development of a building. Government bodies can also request an inspection if there is a possible breach of compliance.
The following are common situations that require a commercial real estate inspection:
- Purchase of a property, at the request of the buyer and/or lender
- Transfer of equity among investors of a building
- A change of use that requires a formal application to a local government (such as a building permit)
- Redevelopment of a building that must meet building code
- A request from a government entity to confirm a property complies with building regulations
Key Compliance Areas
A commercial real estate inspection covers quite a few different areas. Most are focused on occupant safety and environmental compliance. Here we list several that investors and managers should be aware of:
Building Code
Building codes focus on the structure of a building. They generally include items such as building heights and areas, seismic, fire protection, egress and foundation. In the United States, building codes follow the international building code (IBC) and international existing building (IEBC) code standards.
Accessibility
In the United States the ADA, or American with Disabilities Act, plays a key role in building design related to universal accessibility. Compliance around the ADA centers on items such as wheelchair ramp steepness, clearing of debris from entrances, as well as washroom fixture height.
Energy
The International Energy Conservation Code and ASHRAE are the most common regulations governing energy use for commercial real estate inspections. The codes generally establish minimum energy requirements for commercial buildings including building envelopes, lighting and mechanical systems.
Sustainability
Sustainability compliance focuses on energy use and conservation. It increasingly includes a focus on occupant wellness as well. In the United States, LEED is the most well-known building certification system for commercial real estate inspections. LEED (and many other green building certification programs) governs building material and design, energy use and water consumption, among other factors.
Environment
Regional governments focus on the potential impact of land contamination and hazardous materials around properties. Environmental site assessments look at surface and soil materials, groundwater and catch basins to ensure the property does not have any traces of contaminants or hazardous materials dangerous to the public. Generally, the development of Brownfield sites require substantial environmental testing as previous uses were typically industrial in nature. Contaminated properties are usually subject to remediation.
Looking ahead, understanding the changing regulatory environment for building standards is crucial. Commercial real estate inspections continue to be more complex and firms need to stay ahead of the latest environment, design and occupancy regulations.
Feature image: LorenzoCafaro