• Bill Roth

Simple Square Footage Cost

Our series of posts on the varying methods of calculating the Current Replacement Value (CRV) for facilitates continues with a look at the Simple Square Footage (SSF) method. CRV represents the denominator of the calculation for Facility Condition Index, and as such is critical for providing a consistent means of accurately for benchmarking the condition of your buildings across a portfolio.

One of the most common methods for calculating CRV for clients with similar types of buildings, located in a similar geographic area, is the use the SSF methodology. This method works best if you have numerous buildings located within a limited geographical footprint, ideally built to similar construction standards, within a portfolio.

For example, if a Municipality has seven Fire Halls, all built to similar specifications, then determining a base Cost/sq.ft. construction cost can be an efficient and effective way to get a consistent CRV.

Each unique asset type (e.g. Library, Works Building, Elementary School, etc.) can be assigned a base Cost/sq.ft value. The SSF CRV is calculated by multiplying the building Square Footage by the base Cost/sq.ft.

Table 1 below provides sample calculations for three buildings (please note the base Cost/sq.ft. presented are for the purposes of calculation and do not represent recommended construction costs).

The most important factor within this methodology is the accuracy of the base Cost/sq.ft value developed for each building type/category. The data from recent construction may also be used to benchmark the base cost/sq.ft. value. However, it should be noted that the market trends (supply and demand, competition, etc.) may influence the base cost/sq.ft value. To avoid market trends and to be consistent, we recommend recognized cost guidelines, such as Marshall & Swift Valuation Services, RS Means, etc. be used to determine the base Cost/sq.ft. construction cost.

An accurate understanding of the size of your building portfolio is also obviously very critical to this methodology. In our experience, most clients have a reasonable understanding of the square footage of their buildings. However, this is information that can be verified during a Building Condition Assessment (BCA), which is generally how the Deferred Capital Renewal and Maintenance (DCRM) is determined, which is the numerator of the FCI calculation.

One of the biggest advantages to this method is that it is easy to explain to stakeholders; even those that do not have a facilities or asset management background. Additionally, as long as your building measurements are accurate, it is a very consistent method for calculating CRV.

That being said, if you portfolio has a high degree of variation in construction type, building systems, and construction year, the SSF method may not reflect and accurate CRV.

For example, if you manage a school board/division/district that has some simple schools with limited ventilation and no air conditioning, and some other schools that have these features/systems, you will either overvalue the simple buildings or undervalue your more complex buildings. In this case, the comparability of your FCIs will be impacted.

Our next post will focus on the Factored Square Footage methodology for calculating CRV, which can overcome some of the limitations of the SSF methodology outlined here.

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