10. Buildings.—In most cases the utilization of urban ground requires the erection of buildings. As soon as one begins to think of erecting a building in a particular locality the questions arise, What shall the building be?—What is it to be used for? To secure maximum income, and therefore maximum valuation, a building must be designed for the use that appears most logical according to the organization and functioning of the community life about it. To ascertain what this logical use is, it is necessary to make a careful study of the use that is made of prop erty in that section, as well as to determine as ac curately as possible what the tendency will be in the future.
It is a difficult task to judge in what way a section will develop. But it is essential to try to do so in order to be able to decide what kind of buildings to erect in that locality. To determine the type is only to open the door upon a multitude of problems of de tail in regard to floor plans, elevations, structural materials, external ornamentation and interior finish, and accessories to be provided. The more durable one proposes to make a structure, the greater the danger of miscalculation, for the longer becomes the useful life which one attempts to forecast. And fi nally, there is the question of the best time to offer a given improvement to the renting public, in order that the space provided may be rented with reasonable promptness, and yet the construction of the building may not be so long delayed as to cause a burdensome carrying charge, on account of the bare land.
11. Unit building C. C. Evers, in his work, "The Commercial Problem in Buildings," has given a series of cubic-foot costs based upon New York prices of 1910. The following costs, accord ing to his figures, are typical in the case of some of the most common types of buildings: A cheap, de tached frame dwelling, one or two stories high, with out cellar or plumbing, from 7 to 8 cents; a frame detached dwelling, with cellar and furnace heat, 10 to 15 cents; a brick detached dwelling, with hardwood finish and parquet floors, 18 to 30 cents; an elevator apartment of ordinary construction, 18 to 22 cents; a fireproof apartment house, with modern conven iences, 30 to 50 cents; a store or loft building of mill construction, with heavy floors, 10 to 20 cents; a mod em fireproof loft, 20 to 35 cents; and a fireproof of fice building or a financial building, of the average class, 25 to 35 cents. Engineers usually place little
reliance upon square-foot or cubic-foot costs; they prefer to estimate the outlay for construction by analyzing the quantity of each kind of material re quired and the labor involved in putting it in place.
12. is important to realize the danger of over-improving property, especially during periods of speculative excitement when a real estate boom has taken possession of a community. In this connection there are two rules that may be of service to the real estate owner. The first is that any improvement should be made in strict accordance with the standard that has been set in recent years by nearby owners. This policy conforms to the rule of homogeneity referred to in Sections 2 and 4. The second rule is, that the expense of any improvement should be regulated almost entirely according to the comparative showing made by the gross income, the operating expenses, and the net income of nearby structures of different types. The economic value of a building is the capitalization of the net income —calculated for the entire period of useful life— left after operating expenses, amortization and ground rental have been subtracted. Countless er rors, such as those vividly pictured in Richard M. Hurd's "Principles of City Land Values," could be avoided by a more careful reference to income ac counts.
The influence of depreciation rates constitutes a special reason for avoiding over-improvement of prop erty. If an equal sum is invested in ground and building, and if the building depreciates at the rate of 2 per cent a year, an appreciation of but 2 per cent on the ground will be required to sustain the total value intact. But if a structure is erected the value of which is five times that of the ground, a 2 per cent depreciation of the improvement will call for a 10 per cent annual increase in the value of the lot—a burden which the lot is not likely to carry for more than a few years, even under favorable conditions, during a period when the urban function of the lo cality is undergoing a most active transition to a higher plane. In the larger cities there are many examples of buildings which are either over-improve ments, from the point of view of rental returns, or which, if they were carelessly taken as standards, would lead to over-improvement in other buildings.