October 2011
Beginner
442 pages
11h 49m
English
book
Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties
by Gary Grabel
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Value per Square Foot versus Reproduction Cost per Square Foot
With the knowledge that the project's fair market value is $10,200,000, another key ratio, value per square foot, can be calculated. This ratio is derived by taking the FMV and dividing by the project's square footage.
Applying the Diamond Medical Center project numbers to the formula, the result is a project value per square foot of $170 as shown here:
Why is this statistic significant? As discussed next, when evaluating a project, the project's value per square foot when compared to reproduction cost per square foot is an important figure to understand, both from an existing ownership viewpoint as well as through the eyes of a buyer.
Reproduction cost, as the name implies, is the cost associated with building the project beginning with vacant land acquisition. When figuring reproduction cost you must understand how your property was constructed. Costs will vary depending on the construction materials used. Stick-built construction (wood-frame) with stucco is far less expensive than a steel structure with a glass skin and subterranean parking. In addition to on-site construction costs, you also have off-site expenses such as streets, curbs, gutters, sewers, landscaping, site preparation, and drainage issues, and ...
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