Hidden costs are just what they sound like: characteristics of a deal that are not included on the price tag but end up costing you to discover and rectify. For example, hidden costs can be faulty physical characteristics of a commercial property that you don’t know about while you’re planning your construction or renovation project. Before making a deal on buying or leasing commercial property, consider a site evaluation to unearth all the surprise features that will affect the scope of work and the overall budget of your project. Drawing on our team’s experience, here are some of the least obvious but most prevalent examples:
Underground Drain Piping
Every tenant space must have its plumbing drainage connected to the sewer main, and existing plumbing usually already is. The placement of any new sinks, showers, and/or toilets to be installed will be contingent on the proper connection of new drainage pipes to an existing point of connection, or to the sewer main itself, and the depth and condition of those connections. Trenching through the property, and possibly through neighboring tenants’ spaces, to create the possibility for new drainage piping can add a bundle to your costs. Even if you are not installing new plumbing, the condition of the existing drainage could be a timebomb waiting to go off. Establish these conditions first, and settle on who will accept responsibility in the event of faulty infrastructure, tenant or landlord.
City permits are an inextricable part of any commercial property renovation/improvement. It’s practically impossible to have every aspect of your project match your plans at any given time, so if an inspector finds a discrepancy between plans and field conditions, he/she may be unwilling to acknowledge some level of reasonability for the incongruity. The level of allowance will vary per individual inspector, but virtually every project will undergo this kind of plan change at least once. This may mean that plan revisions are required in order to incorporate the representation of some facet of your project. If this is the case, you immediately incur the cost to have architect and engineering teams revise your plans (almost everything on your plans has engineering implications). Not to mention labor costs to submit the plan revisions for approval by the City, as well as the City’s additional scrutiny which oftentimes brings connected project components back into question – a can of worms. Busy municipalities can take weeks, even months to review and approve plans. The cost to you is not just the architectural, engineering and permit fees, but lost time. Make sure your DBGC knows how to navigate the permitting process and advocate for you!
You may find that you need a service upgrade (more electricity or gas) in your new space to power more or bigger equipment. If the existing property has 200 amps of power and you need 400 amps for your commercial kitchen, for example. SDG&E, San Diego’s gas and electric utilities provider, takes several months to process service upgrade requests due to staffing. Your GC will need to correspond and coordinate with them and make sure the SDG&E representative’s field condition requirements are met when he/she comes to the job site.
There are other hidden costs to consider before beginning your construction or renovation, indeed, before making a deal for your new space. Contact us for help identifying and addressing them. Some hidden costs are unavoidable, but being aware of them ahead of time can help you schedule and budget for your project, and even play a major role in choosing and buying/leasing your commercial space. Let us be your resource, we can help during the due diligence phase of your San Diego commercial property acquisition!
APSGC: Commercial Site Evaluations
APSGC: Engaging a General Contractor During Due Diligence (And The First 5 Things to Assess)
APSGC: The TI Permit Process: Avoiding Scope Creep
APSGC: Restaurant and Food Service Construction