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QUALITY Per-Square-Foot

PPSF is often a good metric to guage the value of real estate. But it is not the be all and end all to establish a clear value.

Below are comments from Leonard Steinberg Chief Evangelist | Licensed Real Estate Broker The Leonard Steinberg Team

QUALITY-per-square-foot

The real estate world has become obsessed with price-per-square-foot (PPSF). Worse, so has the consumer. Maybe it makes them feel more intelligent? The reality is that not all square feet are created equal, and those who focus exclusively on the PPSF are bound to make poor decisions over the long term.

Banks and developers are partly to blame for this obsession: the accountants focus ONLY on the numbers as it relates to cost of land, cost of construction and then the sales price....per square foot. The higher the better. This has resulted in the shrinking of proportions to drive the PPSF higher. A 1,200sf 3-bedroom home is a very different animal to a 3,000sf 3-bedroom home. Yet the 1,200sf home could end up being much more profitable.....per square foot. Many refer to larger rooms today as 'wasted' square footage. One day some people (and bankers) may see this 'wasted' square footage as breathing space?

I am all for efficiencies, but often I shudder at the blind insanity of the consumer (and their agent) that focuses exclusively on PPSF - searching that way too - and ends up getting exactly what they wanted: a great price per square foot, but a not-so-great property! Yes some properties have an incredible PPSF because some of those square feet are excessive and not terribly usable or functional. Striking the perfect balance between scale and PPSF is key. It is the ABSOLUTE price that really matters most to the consumer, regardless of PPSF. Just because the PPSF looks like a bargain, does not mean you are buying a bargain. For sellers applying a high PPSF of a super-efficiently-scaled property to your not-so-efficiently- scaled property does not make sense.

PPSF needs to be evaluated case-by-case with clear SPECIFICS, not blind theorizing. I prefer QUALITY-per-square-foot for intelligent pricing and valuation!

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