Columbia University Libraries Digital Collections: The Real Estate Record

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1330 RECORD AND Gl IDE June 28, 1913 BUILDING MANAGEMENT Conducted by Raymond P. Roberts, Building Manager for the American Real Estate Company. ECONOMIC BUILDING HEIGHT. A Method Checking or Determining It In the Case of Skyscraper Office Buildings.- By C. T. COLEY, M. E., 11 AN'all Street. •ySTi HEN our Secretary, Mr, Patterson, y^ asked me to come to Cincinnati and lead in the discussion on some sub¬ ject, I at once thought of the many friends that I have made among you, and realized that Ave were all handling hard problems, and that should I show you how I have solved one or two of mine, the work for you would be easy, when you are called upon to solve a similar problem. I chose the subject, "The Method of Checking the Economic Height of an (Jffice Building," both because it is a problem that is encountered almost daily, and also because it is one for which I have not seen a satisfactory so¬ lution, and consequently the develop¬ ment of a solution Avould be a little new and interesting to you. First, the Land Value, We will consider the erection of one of the most modern and expensive office building skyscrapers, the construction of which must be of the very highest grade. The plot of ground should be in the very best location for a building of this kind. Let us assume a land value of $300 per square foot of lot area. The value of a plot of ground is de¬ termined by the best possible use to which it can be put, or the best im¬ provement that can be made thereon, to bring in the largest net financial return per annum, upon the money invested in the lot. The value of a plot of ground is there¬ fore dependent upon its net annual earn¬ ing capacity, which earnings are usually funded at 5 per cent., making the value of the land about twenty times the net return per annum earned by the land. The annual interest charged on $300 valuation per square foot Avould be $15 with money worth 5 per cent. The New York City taxes are about $1.83 per $100 valuation, Avhich on each square foot of land under consideration AA'Ould be about $5.50 per year. This added to the interest cost of $15 makes a total cost of $20.50 per year for owning one square foot of land in the best financial business district on Avhich to stand a building. Only 65 Per Cent, of Rentable Area. If the entire area is not covered by the building, but say only 95 per cent, of the total, the balance being used for li.ght courts, Ave must divide the total cost per square foot per annum ($20.50) by 95c.. giving $21.58 the amount that must be earned per annum on each square foot of land on which the build¬ ing actually stands. Since only 65 per cent, of the area is rentable area, to produce one square foot of rentable area, we will require one divided by .65, or 1.54 square feet of floor area, and consequently the land carrying charge Avould be increased from $21.58 to $33.23 per square foot of land over Avhich to •-A paper read before the National Con¬ vention of Building Owners and Managers, Cincinnati. --..u;"i iiiu- si|uarc i-i-'t 'if rentable floor area per floor. The question arises at once, what can be done to meet this great expense? One answer is, after looking around to see that it is suitable for the neighbor¬ hood—build a skyscraper office building. What will one cost? How high Avill it have to be, so that the net profit on the building, Avill equal the expense on the land? What will the operating and other expenses be per annum? We will look into the problem. An Office Building the Solution. Experience shows that office buildings of the very best type of granite, marble, bronze and steel construction cost from C. T. COLEY. AA'ill be the Operating Manager of the Xew Equitable Building. 80c. to $1.00 per cubic foot of building volume to build. \\"hen the average dis¬ tance between finished floors is 12 feet, it requires 12 cubic feet of building volume to produce one square foot of floor surface, of which past experience shows that in a well designed building, about 65 per cent, of the total floor area is rentable area. Therefore, to obtain one square foot of rentable area of floor under consideration, it will be neces¬ sary to build 12 divided by .65, or about ISyi cubic feet of building volume. Let us assume that we are to erect a building about twenty-five stories high of the tA'pe costing 80c. per cubic foot. It Avould therefore be necessary to make an expenditure of 80c. multiplied bv 18^, or $14.80 for 18j^ cubic feet of building volume, in order to secure one square foot of rentable area. Cost of Maintenance, The cost of maintaining one square foot of rentable area per annum in a high class building of this kind is shown in the accompanying table. -Assume an allowance of 10 per cent, of gross rents for vacancies and loss of rent on an average rent rate of $3.50 per square foot—3Sc. This makes the I't-r .sq. ft. rentable area. Engine room lalior, supplies and repairs ■.......................18 Coal and ash removal.......... .15 Elevator labor, supplies and re¬ pairs........................09 Janitor's labor and supplies.....15 Electrician's labor and supplies. .02 Supervision and collections......09 Building repairs.................15 Insurance .......................01-1 Water ..........................02-1 Sundries ........................01 Sub Total....................88 Taxes on structure alone........27 Total ........................1.15 total $1.50. Interest on 5 per cent, on an investment of $14.80 necessarj' to produce the required building volume to secure one square foot of rentable area, 74c. -Allow for depreciation and amorti¬ zation in 50 years about 30c. (Mcmey worth 4 per cent, compounded semi-an¬ nually.) Total cost per annum, $2.54 per square foot of rentable area. Subtracting this cost of $2.54 from the gross rent rate of $3.50 per square foot of rentable area leaves a net profit per square foot of rentable area of 96c. per floor. The Final Calculation. In order to equalize or Avipe out the annual expense of $33.23 for the lot area on which to build one square foot of rentable area, we would need to get the profit of 96c. per square foot rentable area per floor by repeating the opera¬ tion or building floors upon floors as many times as 96c. is contained into $33.23, or 34.6 times, making the build¬ ing 35 stories high. Hence it will be seen that properly to develop or improve a plot of land Avith' the value assumed Avhich Avill pay 5 per cent, on the investment in the land and building, and at the same time set aside a proper fund for depreciation and amortization, a 35-story building will be necessary. This Avould be the proper height for the building, provided that the plot area was sufficient to alloAV for the proper shafts up through the build¬ ing to contain pipes, smokestack, stairs and elevator shafts and still give a rent¬ able area of the assumed 65 per cent, of the gross area. WIRE ROPE SUGGESTIONS, Many Elements Combine to Produce Satisfactory and Economical Service. \\'ire rope expense can be greatly re¬ duced by the use of a suitable rope for every Avork and by its correct handling during installation and proper care dur¬ ing operation. Working conditions also require careful consideration and often¬ times changes can be made that Avill ef¬ fect a material saving. The most satisfactory results are al- Avays obtained Avith large size sheaves and drums; the greater the diameter of the sheaves and drums, the longer the rope will last. Experience has demonstrated that Avear increases Avith speed; therefore, true economy results from increasing the load