Demo building and build condos?

Question

Bob Dole · Answer

@Wilson Lau, @Corey Williams, and @Amit M.Thanks for your insight thus far! These are things I hadn't even thought about it.  I was just assuming it could be done because of the surrounding buildings are a mix of commercial, industrial and housing.  The area is zoned for mixed use of residential and commercial/industrial.  Think of the Mission & Valencia area in SF.  Just a mix of everything.  The building next store are apartments/condos.  The building to the other side I believe is a restaurant.  The current building that I'd consider demolishing is already a mix of industrial (downstairs) and residential (upstairs).  I don't know if we'd need to do any rezoning or not because of this.But assuming $600 per foot gives me a ball park.  If it was 3 stories, the top 2 floors would be the largest and the bottom would be the smallest.  If we assume 1800 sq feet for each of the top 2 floors, and say 1000 for the bottom, we're talking about 4600 sq feet here.  Build cost would be $2.8m easily.  Throw in permits, studies, legal, etc we're talking $3m easily.  I'd need to see how much we unit could be sold for, but I'd assume $2m a piece on average for the larger units and 1.5m for the smaller unit.  So that's $5.5m.  So a potential net profit of $2.5m.  Plus whatever the current property is.  I believe I can get the property for a good deal, ~$1m'ish.  So that would knock off another $1m in profit.  Down to $1.5m in profit potentially.

Wilson Lau · Answer

For Bay Area, if you have to put a number for ballpark calculation, you can use $600/sf. However, like many others have pointed out, there are lots of nuances to it. City regulations, specific location, grading, quality of build, etc can all change your calculation. If it's an industrial site, it is likely not zoned for residential use. Phase 1 and Phase 2 studies can increase your cost significantly.

Corey Williams · Answer

There is a lot more to unpack here than just construction cost.

Industrial sites can have clean dirt for sure but they can also have contaminated soils that can carry a high cost to remediate.  It could also be zoned industrial but maybe nothing has ever been built on it.

What are the surrounding uses?  Does this one site make sense to rezone for residential. Is the whole area being redeveloped?

You may have all of these answers already but most of my career has been researching potential development parcels for zoning, utilities, environmental concerns and feasibility so vague questions like this without much context get my wheels turning to help out and make sure you have all of your bases covered.

Amit M. · Answer

Does zoning allow for residential condo use?

Construction would be nowhere near $2000 PSF. Closer to $600-900. Keep in mind new SFH is normally high end finishes. And at 3-4 stories a low rise condo bldg is still wood construction, so similar to SFH costs, even in Bay Area.

Stuart Udis · Answer

Nobody can accurately assist without better understanding the location and the type of construction that's proposed. This is going to be very location specific.