If you’re thinking about purchasing or leasing a commercial property, getting a professional inspection should be at the top of your to-do list. I know inspections might not sound very exciting, but trust me, they can save you a huge headache down the road. 

Unlike inspecting a single-family home, checking out a commercial building requires a whole different level of scrutiny. You’re dealing with really complex electrical, HVAC and plumbing systems, fire and safety equipment, elevators – not to mention special zoning and accessibility regulations. It’s a lot to take in.

That’s why a thorough inspection by someone who knows commercial real estate is so important. You want to have a complete picture of the property’s condition before you commit. Nothing worse than getting stuck with expensive surprise repairs or problems that put people at risk!

In this guide, I’ll walk you through everything you need to know about getting a commercial property inspected. We’ll look at:

– The different types of inspections available

– What gets examined during an inspection 

– Who should perform the inspection

– When you should schedule it

– How to prepare for smooth inspection 

– What happens after the inspector’s visit

– Some issues that may be uncovered

– The major benefits of doing your due diligence

So if you’re looking to buy, lease or finance commercial real estate, read on for a thorough overview of commercial building inspections. Let’s get started!

Why Bother With an Inspection?

Great question! You might be tempted to skip the whole inspection thing if the property looks okay on the surface. But here are a few key reasons you definitely want to get one:

Avoid Big Surprise Expenses – An inspection identifies any hidden defects, maintenance issues or necessary repairs BEFORE you buy or lease the building. You can then understand the costs involved and negotiate the price or contract terms accordingly. No fun surprises down the road.

Check for Safety Hazards – Inspectors look for issues like fire code violations, faulty elevators, mold and mildew, electrical problems, structural deficiencies that could put people at risk if not addressed. Get those fixed before move-in. 

Evaluate Upgrades & Improvements – An inspector will note systems that are outdated or approaching the end of their useful life. This allows you to budget wisely for any upgrades, replacements or maintenance needs from the start.

Verify Legal & Regulatory Compliance - Zoning laws and building codes change over the years. An inspection confirms the property meets current standards for occupancy, fire/electrical systems, accessibility, and allowed uses. Critical information!

Informed Negotiation – Detailed inspection reports give you leverage to negotiate on price if repairs are needed. You can even make fixes a condition of the purchase contract. Knowledge is power!

Secure Financing – Lenders want a current inspection to assess risks before financing commercial property deals. Take care of issues upfront to ease the approval process.

Ok, so those are some excellent reasons to schedule an inspection pronto. Next let’s look at the different types you’ll encounter.

Types of Commercial Property Inspections

There are a few flavors of commercial real estate inspection reports to be aware of:

The Pre-Purchase Inspection

This is the big daddy of inspections! A pre-purchase inspection is very thorough, covers all aspects of the building inside and out, and gives you an objective assessment of the overall condition. This identifies any maintenance issues or necessary repairs for you to consider before finalizing a purchase. 

Sellers sometimes even get a pre-listing inspection done before putting a property on the market. That allows them to make fixes and avoid surprises during the buyer’s due diligence.

The Insurance Inspection 

These are done whenever an insurance company is issuing a new policy for a commercial building. Their goal is to check out factors that might impact premiums – age of the roof, electrical systems, HVAC, plumbing, overall wear and tear. 

The insurer may require certain repairs to be completed before they’ll issue a policy. So be sure to schedule well in advance of the policy start date.

Appraisal Inspections

When a lender commissions an appraisal to assess the property’s market value, the appraiser will include a general inspection as part of their report. It’s not as exhaustive as a pre-purchase inspection but provides useful information on condition.

If you’re seeking financing, don’t rely solely on the appraiser’s inspection. Do your own comprehensive review as well so you don’t miss anything.

Municipal Inspections 

When commercial property changes hands, local municipalities often require a general inspection to check for compliance with zoning, building codes, fire codes, etc. 

These are usually pretty cursory – more of a pass/fail than a close look at building condition. But repairs might be required before the new owner can get an occupancy permit.

So those are the main scenarios where commercial inspections come into play. Next let’s look at everything the inspector will examine.

What Gets Inspected in a Commercial Building?

Commercial inspectors take a very comprehensive view of the entire property. Here are some of the main systems and components they’ll be checking out:

The Building Exterior

– Condition of exterior walls, windows, doors, trim, siding, masonry, painting and caulking

– Checking the facade for any damage or deterioration  

– Proper drainage away from foundation and any downspout issues

– Settlement cracks that could signal foundation problems

– Vegetation contacting the structure which can lead to damage

The Roof 

– Documentation on roof age, materials used, warranty info

– Looking for leaks, water ponding, damage to flashing, membranes, shingles 

– Condition of drains, gutters, skylights and vents

– Signs of water damage in interior ceilings below roof

The Structure

– Checking foundation for cracks or water damage

– Looking for evidence of shifting or settlement 

– Condition of framing and load-bearing elements

– Evaluating basement/crawlspace for moisture issues

– Testing wood framing for rot or termite damage

Electrical Systems

– Main panel and all subpanels – are circuits labeled correctly?

– Sufficient circuit breakers and amperage capacity for building use

– Condition of switches, outlets, wiring, junction boxes

– Functioning emergency egress lighting and exit signs

– Backup generator inspection and load testing if present

Plumbing

– Condition of incoming water supply lines and main shut-off valve

– Checking for leaks in drain pipes or vent stacks

– Operation of all fixtures like toilets, sinks, water heaters 

– Sprinkler systems tested and current inspection tags intact

– Proper venting of gas appliances like water heaters 

Fire Protection

– Testing fire sprinkler system water pressure and control valves

– Checking code compliance on egress routes and exit signage

– All fire extinguishers verified as inspected and charged

– Fire alarm system tested – notification devices, pull stations, smoke detectors

– Kitchen hood extinguishing system inspected if present

HVAC Systems

– Heating/cooling equipment – age, capacity, venting, filters, belts 

– Thermostats and control systems calibrated and functional

– Supply and return vents clear and balanced airflow

– Ductwork and piping in good repair without leaks

– Boilers inspected and serviced per code 

Elevators & Escalators

– Current certificate of inspection from local authority 

– Documentation of routine maintenance and logs

– Testing functionality of doors, lights, controls, motors

– Cables and pulley systems showing no wear

Parking, Roads & Grounds

– Checking for cracks, potholes, fading in parking lots and sidewalks

– Proper lighting for walkways, signage and striping clarity

– Fencing, gates and landscaping well maintained

– Site drainage to divert stormwater away from buildings

Interior Finishes

– Condition of walls, floors, ceilings, doors, windows and trim

– Operation of lighting fixtures and built-in appliances

– Evidence of past or present water damage from leaks

Zoning & Code Compliance

– Proper occupancy classification and certificate of occupancy  

– Construction permits properly closed out 

– Fire detection, suppression and egress per code

– Handicap accessibility per ADA standards

– Number of electrical circuits meets code minimums 

Environmental Hazards

– Asbestos containing materials or lead paint

– Evidence of mold, mildew or pest infestation

– Proper handling/disposal of hazardous materials

– Checking for radon gas in basement or ground floor

Phew, that’s a boatload to look at! Having an experienced commercial inspector with the right expertise is key to identify any issues with these areas.

Next, let’s talk about…

Who Should Perform the Inspection?

Not just any building inspector will do. You want someone with extensive experience inspecting large commercial properties matching yours. Here are some options:

Licensed Commercial Building Inspector – My top choice. These guys focus exclusively on commercial real estate. They have deep knowledge of HVAC, electrical, plumbing and fire systems from intensive training and certifications.

General Contractor – A GC who routinely handles commercial projects can be a good choice too. Pick one familiar with buildings like yours – schools, hospitals, apartments, etc.

Professional Engineer – PEs have the qualifications to do very thorough inspections covering structural and mechanical systems. More costly but incredibly detailed.

Architect – Great for evaluating code compliance, allowable occupancy, zoning regulations and construction quality. Their design background provides helpful perspective.

I’d recommend looking for an inspector with at least 5 years of commercial inspection experience in your geographic area. Check reviews and references to confirm others have been pleased with their depth of knowledge and reporting.

Some states require inspectors to be licensed, which involves passing exams and meeting experience requirements. Licensure gives an added degree of consumer protection and confidence in their abilities.

When Should the Inspection Happen?

Timing is important with commercial inspections. Here’s when to schedule them:  

During Due Diligence – For a property you have under contract, conduct the inspection early in your due diligence period so you have time to review findings and negotiate repairs before closing.

Before Lease Signing – Get a property inspection before finalizing a commercial lease so you know the condition and equipment lifetimes. This also determines the landlord’s versus tenant’s maintenance responsibilities.

Prior to Financing – Lenders will want to see a recent inspection report when underwriting loans. Take care of any required repairs upfront to ease the approval process.

Before Major Renovations – If planning updates, an inspection will inform your scope of work and budget. Fix basic problems before enhancing things like finishes.

Before Insurance Renewal – Insurers may periodically re-inspect for policy renewals. Fix any issues promptly to avoid coverage problems.

Leave plenty of time to negotiate with sellers or landlords based on the findings. You want to avoid last minute surprises!

Next let’s talk about…

What You Should Do During the Inspection 

I strongly encourage attending the inspection in person rather than just reading the report later. Walking along allows you to ask questions, gain extra insights and learn more about the building’s history.

Here are some tips to make the most of your time:

Take Notes & Photos – Supplement inspector’s report with your own observations. Jot down or voice record their feedback on concerning issues and expected repairs needed.  

Ask Questions – Have inspector point out problem areas and explain the scope of recommended fixes. Prioritize the most urgent or costly items.

Discuss Big Ticket Maintenance – Get inspector’s opinion on upcoming replacements for roof, HVAC equipment, etc. based on condition and ages.

Look for Safety Hazards – Have them identify any fire, electrical or structural hazards, ADA non-compliance, etc. These become negotiation points.

Verify Building Code Compliance – Request inspector’s assessment of proper zoning, approved occupancy limits, construction quality. 

Get Cost Estimates – Ask for ballpark figures to fix deficiencies. This informs negotiations with seller/landlord over credits or fixing issues.

Clarify Responsibilities – Determine if repairs should fall to seller or are priced into deal for you to handle post-closing.

Flag Follow-Up Needs – Note areas needing deeper analysis like possible mold, asbestos, or underground oil tanks so you can arrange specialized inspections.

Attending the inspection in full allows you to gather details that a written report alone can’t provide. It shows the seller you’re doing careful due diligence too.

Now what happens after the inspector leaves?

What Happens After the Inspection?

Once the inspector submits their full report, here’s the drill:

Carefully Review Findings - Take time to analyze the inspection report and any notes you took. Follow up with inspector via phone with remaining questions on issues found or recommendations made.

Negotiate Repairs – Use the report to request credits or negotiate specific fixes by the seller based on findings. This restores the building to the expected condition per your contract. Get quotes on big items to support cost estimates.

Complete Minor Repairs – For smaller issues, factor those costs into the deal as repairs you’ll handle after closing. If extensive enough, this may adjust the price you’re willing to pay.

Discuss Timelines – Establish deadlines for seller to complete repairs before closing. For major work, you may hold back funds in escrow until finished post-closing. Walk through property again right before closing to verify fix completion.

Review with Your Lender – Share the inspection report with lenders to see if they require any repairs for financing approval. Better to know upfront. 

Inform Insurance Carrier – Issues like an old roof may impact insurance rates and coverage. Take care of deficiencies before the policy kicks in to avoid problems. 

Use the inspector’s findings to negotiate the best possible outcome, factoring in costs to get the building up to speed. Now let’s look at some potential issues they might uncover.

Common Problems Found in Inspections

Inspectors have an eagle eye for deficiencies from years of experience. Here are some typical issues that may be lurking:

Deferred Maintenance – Outdated mechanical equipment, broken fixtures and worn surfaces are common as owners put off non-essential expenses. But repairs become required soon enough!

Building Code Violations – Older properties may have inadequate fire suppression or outdated electrical panels per current codes. Necessary but costly fixes.

Water Damage – Leaky roofs and plumbing often lead to mold, damaged walls, peeling paint andstained ceilings. Drying out and repairs are critical.

HVAC Problems – Faulty ventilation, old boilers with insufficient heat output, leaky evaporator coils, and inefficient compressors driving up energy costs are prevalent.

ADA Non-Compliance – Many older properties lack handicap ramps, restrooms, accessible routes and signage now required per ADA standards.

Structural Cracks – Cracks in foundations, walls or ceilings can indicate shifting and settlement issues. Further structural engineering analysis may be needed. 

Electrical Issues – Improper wiring, overloaded circuits, lack of arc fault interrupters near water and insufficient circuits often crop up in older buildings. 

Bad Roofs – Commercial roof leaks and water ponding instead of proper drainage are super common. This accelerates wear and can even collapse roofs.

Parking Lot Deterioration – Cracks, potholes, faded paint lines in parking areas pose risks and give a poor first impression.

Fire Safety – Faulty fire alarms, expired extinguishers and inadequate exit signage are red flags for life safety.

Mechanical Wear & Tear – Elevators, HVAC, electrical and plumbing systems degrade over time. Being proactive about upgrades avoids operational disruptions and tenant discomfort.  

Pest/Vermin Infestation – Rodents and bugs love buildings with cracks, clutter and food remnants left out. Yuck!

In summary, commercial properties have a LOT of components that need vigilance. Pay now or pay (more) later!

Next we’ll look at… 

How to Prepare for a Smooth Inspection

A little prep work upfront makes the inspection process go much more smoothly:

Share Background Documents – Gather prior inspections, construction plans, equipment manuals and warranty info. This provides invaluable building history. 

Talk with Property Managers – Get their input on recurring issues, recent repairs and upcoming capital needs. Their insights complement the inspector’s fresh perspective.

Schedule Access – Make sure inspector can enter all areas – electrical rooms, roof, individual apartment units, etc. Coordinate with tenants in occupied buildings.

Have Staff on Hand – Maintenance crew, property manager or superintendent should be present to provide context and answer questions. 

Pull Permits & Service Records – Have recent maintenance logs, inspection certificates and construction permits ready for inspector. Proves due diligence to governing authorities.

Do a Pre-Inspection Walk – Walk the property first and flag any obvious issues, however minor. Easy points earned by showing you’re on top of things. 

Clear Access Points – Remove clutter around electrical panels, roof hatches, mechanical rooms. Allows inspector full visibility. 

Turn On Utilities – Ensure water, power, and gas are flowing so systems can be inspected while operational. 

A little time preparing avoids wasting the inspector’s time fumbling around. It provides a clearer picture too.

Okay, we’ve covered a lot of ground on commercial inspections. Let’s wrap up with…

The Benefits of Getting a Thorough Commercial Building Inspection

Given the magnitude of most commercial real estate investments, getting a detailed inspection is one of the smartest steps you can take for risk mitigation. Key benefits include:

Avoiding hidden costs: Inspections uncover issues early so you can factor the cost of repairs into negotiations rather than being stuck with surprise expenses down the road. This protects your investment.

Informing operation plans: Knowing the precise condition of systems allows you to budget and plan upgrades to optimize building performance from day one.

Verifying regulatory compliance: Get confirmation that the property meets governing codes for occupancy, fire safety, electrical, accessibility, and zoning.

Assessing environmental hazards: Identify concerns like asbestos, lead paint, mold and radon so they can be properly remediated.

Added leverage in price negotiation: Detailed inspection reports give you an advantage in negotiating the purchase price or lease terms based on repair costs uncovered.

Risk mitigation for financing: Repairs required by inspections help obtain financing by reducing the risk lenders take on. Inspections provide essential information to insurance companies as well for policy issuance.

Averting liability issues: Identify safety hazards like code violations and defective safety equipment to avoid liability after taking occupancy.

For a relatively low cost, inspections provide tremendous upside by informing negotiations, operations and mitigating the risk of inheriting a problem property. They lead to better financial outcomes and help safeguard what for most owners is one of the largest investments they will make in their lifetime.

Conclusion

A detailed commercial building inspection performed by a qualified professional is vital due diligence before acquiring any type of investment real estate. Inspections identify issues in need of repair and provide critical insights on the property’s overall condition to inform negotiations, financing, insurance coverage, improvements planning and risk mitigation.

Knowing exactly what you are getting with a building is well worth the cost and effort of a comprehensive inspection. The potential savings and insights gained make inspecting before purchasing or leasing commercial real estate an indispensable step that experienced investors never skip.