Office Property Condition Assessments: Annex A1.2, Tenant Spaces, Central Plant and Vertical Transportation

Office buildings are a familiar PCA subject; NV5's public sample report, for example, covers a three-story 1980 office building. All ten baseline systems apply. What sets an office assessment apart is how much of the building sits behind tenant doors, how much of the reserve sits in a few pieces of central equipment, and how the lease splits responsibility between landlord and tenant. This page is for the engineer writing the report and for the buyer or lender ordering it.

What is different about office

Office PCAs are ordered by acquisition buyers, by bank lenders on acquisitions and refinances, and by conduit lenders whose loans will be securitised, where the rating agency's criteria sit behind the lender's engagement letter. Agency multifamily forms do not apply. E2018-24 addresses offices in Annex A1.2, which is mandatory. In paraphrase, it asks the observer to:

• Survey each construction phase of a phased complex.
• Apply representative observations building by building. In a multi-building office complex, one building does not stand in for the others, which is stricter than the multifamily rule.
• Include a mix of occupied tenant space, vacant tenant space and common areas, and enough top and bottom floors.
• Size the sample by the observer's judgment, unless the user and consultant agree a quantity, so that the opinion is held with reasonable confidence.
• Report the areas surveyed and why they were chosen, plus the quantity of space reported as not available for occupancy and the reasons given.

Two general rules matter more here than elsewhere. Tenant-owned systems, such as supplemental cooling for a server room or a tenant's own rooftop unit, are identified in general terms and described as outside the scope. Tenant improvements and finishes are excluded from the cost opinion, as are cosmetic work and repositioning.

The systems that drive cost

The reserve on a mid-size or larger office building is usually driven by a small number of expensive lines: the roof, the facade and its sealant joints, the HVAC plant (packaged rooftop units on low-rise buildings; boilers, chillers and cooling towers on larger ones), the elevators, the fire alarm panel, and the paving. Interiors come next, but only the landlord's share: lobbies, corridors, common restrooms and base-building ceilings. S&P's published PCA criteria for office buildings (an older document, still circulated) direct the consultant to describe the typical tenant space and common corridor finishes. On electrical they ask about service size, UPS systems, tenant metering and firestopping at electrical room penetrations. On elevators they ask for the service company, the control type, the fire service recall, and the date of the last inspection and load test.

Useful lives the reserve table uses

Component	HUD EUL, Family column (yrs)	HUD table row
Low-slope built-up roof, with gravel finish	20	3.3.4.2.1
Low-slope adhered rubber membrane (EPDM)	15	3.3.4.2.3
Metal and glass curtain wall	40	3.3.3.1.7
Caulking and sealing	15	3.3.2.4.1
Package HVAC rooftop unit	15	3.4.3.1.11
Chilling plant	20	3.4.2.1.17
Cooling tower	25	3.4.2.1.16
Boiler, gas-fired sectional, centralized	25	3.4.2.1.2
Elevator controller, call, dispatch, emergency	10	3.5.1.3
Elevator hydraulic piston and leveling	20	3.5.1.9
Smoke and fire detection system, central panel	15	3.6.2.7
Acoustic tile or drop ceiling, common areas	15	3.7.1.1.12
Carpet, common areas	6	3.7.1.1.11
Asphalt pavement	25	3.2.4.1

The HUD table was written for multifamily housing. It is public domain and organised by the E2018 outline, which is why firms use it as a reference for commercial buildings too, but a firm may substitute its own expected lives and should say so. The report should give the basis for each remaining life, especially on the plant and the elevators, where an effective age different from the calendar age needs a reason (maintenance records, a controller upgrade, a replaced compressor). See the HUD table and effective age.

Table 1 or Table 2

Table 1 on an office building usually carries life-safety and code items (fire alarm or sprinkler impairments, exit signage and emergency lighting, open penetrations in rated assemblies), active roof leaks, facade conditions that could drop material or let water in, and trip hazards on walks and in parking. Each item should say which of E2018-24's immediate tests it meets. Recommendations for further study, such as a facade inspection or an infrared roof survey, go in the report with their own cost.

Table 2 carries roof replacement, sealant cycles, rooftop unit replacement (usually phased by age rather than all in one year), chiller, tower and boiler replacement where their remaining life falls inside the term, elevator modernisation components, fire alarm panel replacement, common-area finishes and paving. S&P's office criteria leave tenant-responsibility items out of the cost estimates and operating expenses out of the reserve schedule. They still include anything with a predictable useful life that routine maintenance does not cover. See the reserve table explained and cost categories.

Access and tenant-space sampling

No standard sets a percentage of tenant floor area for office buildings. E2018-24 leaves the quantity to the observer's judgment unless the engagement fixes it, and S&P's criteria say only that not every tenant space has to be surveyed, while every building's envelope and base-building systems do. In practice that means agreeing the sample before the visit, asking the owner to arrange access to occupied suites and at least one vacant suite on the top and bottom floors, and listing in the report every suite entered, every suite that was not, and why. The guide does not allow the observer to enter spaces the owner or occupant refuses; those become limiting conditions.

Lender specifics

A conduit lender's engagement letter usually passes rating-agency expectations to the consultant. S&P's criteria set the reserve horizon at the loan term plus two years, with the term supplied by the client, and ask that costs be built from quantities and unit costs, not lump sums. The reliance letter has to cover whoever will rely on the report; see reliance letters. S&P's office criteria also offer an optional building-measurement check against BOMA standards when drawings are provided. See rating-agency PCA criteria and what lenders want.

Common pitfalls

• Treating one building in a multi-building office park as representative of the rest, which Annex A1.2 does not allow.
• Surveying only vacant suites and the lobby.
• Costing tenant improvements or a lobby upgrade as a deficiency.
• Reserving tenant-owned rooftop units or supplemental cooling without checking who owns them under the leases.
• Giving an elevator or chiller remaining life from its nameplate year with no maintenance or modernisation history.
• Leaving out the vacant-area quantity and the reported reasons.

Writing the report

Baseline PCR drafts the E2018-24 report from the field notes, photographs and documents: the systems in the guide's order, the areas surveyed and not surveyed in the walk-through section, tenant-owned equipment described as outside the scope, and every statement tagged as observed, reported or documented. It computes Table 1 and Table 2 from the firm's cost library and the HUD table. The engineer reviews and edits every line, confirms the ratings, remaining lives and categories, and signs. The sample report is a 1985 two-story office building. The HVAC section guide and the vertical transportation guide cover the two systems that usually carry the largest lines.