Structural due diligence: The hidden risks in NYC commercial real estate deals - by Joe DiPompeo
NYC’s commercial real estate market is one of the most competitive and complex in the world. Whether you’re purchasing a mid-rise office building in Midtown, converting a warehouse in Brooklyn, or acquiring a mixed-use development in Queens, each deal comes with layers of opportunity – and risk.
While savvy investors often focus on zoning, financials, or tenancy, one critical element is often overlooked until it’s too late: the building’s structural integrity. A thorough structural due diligence assessment can mean the difference between a profitable investment and a costly mistake.
What Is Structural Due Diligence? Structural due diligence is an evaluation of a building’s structural components – its foundation, framing, roof system, load-bearing walls, and more. The goal is to identify any current or potential issues that could affect the safety, value, or longevity of the property.
This process is typically conducted by structural engineers who assess whether the building has indicators of settlement, movement or deterioration, has undergone modifications, or has signs of wear that could lead to future failure or expensive repairs.
Why It Matters in NYC: New York City buildings are subject to extreme weather fluctuations, heavy usage, and decades (sometimes over a century) of wear and tear. Many properties on the market have lived through multiple renovations, tenant turnovers, and code revisions. The city’s unique building stock – from pre-war masonry structures to postmodern concrete and steel towers – comes with a range of hidden challenges.
Moreover, NYC’s Department of Buildings (DOB) enforces rigorous inspection cycles such as the Façade Inspection Safety Program (FISP) and Local Law 126 for parking structures. Failing to comply with these requirements can lead to violations, costly fines, or forced remediation.
Common Structural Red Flags: A walk-through or basic property condition report might not be enough to uncover the deeper issues that could derail your deal. Here are some common structural red flags our engineers at Structural Workshop often encounter:
1. Cracks in Foundation or Load-Bearing Walls: Hairline cracks may seem harmless, but larger diagonal or stair-step cracks often indicate movement, settling, or pressure imbalances. Left unaddressed, these issues can compromise the entire structure. Hairline cracks could also be the start of larger cracks.
2. Water Infiltration and Corrosion: Moisture is a silent killer in buildings. From leaking basements to corroded steel reinforcements and delaminating concrete, water damage can weaken structural components and lead to mold or unsafe conditions.
3. Unpermitted Alterations: It’s not uncommon for past owners to cut corners. Modifying or removing load-bearing walls without proper engineering can create dangerous conditions. Our assessments can reveal work that was not filed with the DOB, exposing investors to compliance risks and costly retroactive approvals.
4. Deteriorated Structural Elements: Aging foundations, rusted steel, and spalling concrete are often signs that a building’s bones are failing. These issues require significant repair or replacement, often at a higher cost than investors anticipate.
5. Code Compliance Issues: NYC’s building code is constantly evolving. Older buildings may be grandfathered in, but major renovations often trigger code updates. Structural due diligence can uncover whether the building meets current seismic, wind, or snow-load requirements – especially important for rooftop additions or vertical expansions.
The Cost of Skipping Due Diligence
Skipping a proper structural assessment can lead to severe consequences:
• Unforeseen Repair Costs: Investors may be hit with six or seven figures in unexpected repairs after the deal closes.
• Delays in Occupancy or Leasing: Safety hazards or DOB violations can delay renovations or tenant move-ins, impacting revenue.
• Legal and Insurance Liabilities: Structural failures can lead to tenant injury, lawsuits, or denial of insurance claims.
• Reduced Property Value: A building with structural concerns is harder to sell or refinance, reducing your return on investment.
In a market like New York City, where margins can be razor-thin and competition is fierce, having this information before signing on the dotted line is essential.
How Structural Workshop Supports Smart Investing
At Structural Workshop, we specialize in structural engineering assessments that empower investors to make confident, informed decisions. Our experienced team has evaluated hundreds of commercial properties across the five boroughs, from 19th century industrial buildings to cutting-edge high-rises.
Here’s how we support our clients during the acquisition process:
• Tailored Structural Assessments: We don’t offer cookie-cutter inspections. Every property is unique, and our due diligence is customized based on its age, use, location, and proposed development plans.
• Clear, Actionable Reports: Our reports translate technical findings into actionable insights. We can highlight not just what’s wrong, but what it will take to fix it, how much it might cost, and how it could affect the deal timeline.
• Coordination With Other Consultants: We collaborate closely with architects, MEP engineers, and environmental consultants to provide a holistic view of the building’s condition – ensuring nothing falls through the cracks.
• Support Through Negotiations: Our assessments often give buyers leverage during purchase negotiations. Whether it’s negotiating a seller concession or recalibrating your renovation budget, we arm you with data to protect your interests.
• Post-Purchase Planning: After closing, our team can help develop structural repair plans, secure permits, and even perform construction administration services to make sure your investment is structurally sound and code compliant from day one.
• Due Diligence Isn’t Optional – It’s Essential: The fast-paced world of NYC commercial real estate rewards speed and bold moves. But it also punishes oversights. Structural due diligence may not be the flashiest part of a deal, but it’s one of the most important.
A thorough structural assessment offers more than peace of mind – it’s a strategic advantage. It protects your capital, supports your vision, and ensures that what you’re building on is safe, sound, and sustainable.
Joe DiPompeo, PE is president of Structural Workshop, LLC, Mountain Lakes, N.J.