The urgency of competition with other buildings, which has led many owners to enter into those obligations to their tenants which have been previously referred to, has further involved certain of them in very extensive expenditures of capital and much unknown future expense by entering upon the manufacture of power or heat for these conveniences, by means of the installation and operation of high-pressure steam- and power-generating machinery of complex and expensive character and of limited useful existence.
The cost of installation and operation of these domestic factories, which are often quite complicated combinations of mechanisms, is greatly enhanced by the provision of necessary space, which is usually obtainable only by the most expensive part of a building's construction, namely, the excavation of cellars or sub-basements, which may be otherwise unnecessary.
The services covered or provided by such power or motive equipments may not be and are not generally the largest element in the operating expenditures of a building, but they are thus made to involve a relatively large share of capital outlay and a disproportionate share of the depreciation of the total investment. In effect, they are a growth upon building operation in which real estate investors have really no interest, which renders the investment less definite.
The actual proportion of the gross income involved, inclusive of depreciation, in the manufacture and supply of power, heat, etc., for these modern conveniences is
"Sections of cities built up with great uniformity usually drift into a lower class of occupancy and lower rentals"
Manufacturing or Power Machinery
In loft buildings, about ....
13 to 14%
In business buildings, about. . .
15 to 17%
In elevator apartment-houses, about
23 to 25%
The practice of establishing interior heat- or power-generating plants seems to have grown out of past deficiencies in public supplies of some particular form of service installed in the building, as, for instance, in the use of elevators operated by hydraulic force, for which the public water service is unsuited, and of which there is no available commercial supply such as is established in some European cities of magnitude.
The provision of necessary power for this particular purpose led in many buildings to the addition of other engineering appliances affording other services, which, as above remarked, are not similarly obligatory upon the ownership. These have become largely gratuitous, being included in the established rate of rental, and have thereby become the subject of much extravagance, waste, and misuse on the part of tenants.
As rentals decline, the relation which such services bear to the gross rentals increases and often becomes burdensome, and the relative cost of the production of power also increases by reason of the age and corresponding inefficiency of the domestic factory, while the tendency of usage is all in the direction of increase and brings greater demands upon the apparatus.
The financial bearing, upon the investment, of the provision of machinery or power-manufacturing appliances in a building is not often fully appreciated, it being assumed that such apparatus justifies its existence by some economy in cost of its output as compared with some other presumed condition.
The location of such apparatus has already been referred to. It necessarily involves the use of some portion of the building below the ground level, and sometimes of an extension of the building below ordinary basement levels, specifically constructed for this purpose.
This naturally becomes the most expensive portion of the construction of the building, by reason of the excavation of solid materials which is involved, of the construction of retaining-walls, and, in the case of any depth exceeding that of the sewer or drainage system in the vicinity, of the provision of waterproofing, not infrequently accompanied by the operation of pumps to drain away seepage, or to lift sanitary discharge-water from this low level.
The logical purpose of engineering appliances thus placed is to operate the required services and conveniences of the building in the absence of means for this purpose provided by a municipal system or by a public service.
But where such apparatus is installed in face of the accessibility of such public supplies, the purpose of the installation becomes merely competitive, and is no longer to be regarded as necessary. The commercial value of such apparatus is then limited to its ability to compete with the exterior service, and its life of effective usefulness ends when the cost of its output equals the cost of a similar output purchasable from any other source.
Such supplies may be obtainable from neighboring installations, but then require consideration from the viewpoint of their stability and reserve capacity.
There are, however, generally available in most cities municipal or public supplies of various characters. Thus, electrical service is practically universally available, and this alone covers the operation of a large proportion of the conveniences and necessaries in modern buildings.
Usual public supplies also include water, gas, and in some sections steam for heating purposes, and in other cases refrigeration. The cost of such supplies may be regarded as generally liable to future reductions in rates, and conservative practice would therefore seem to dictate provisions for their future use, even if their present use be not adopted.
The economic value of power-generating apparatus is commonly established, or assumed to be established, by the difference between the cost of a public or neighboring supply and the cost of the same service provided by the installed apparatus; but this limited comparison does not take into account some essential elements which, if properly considered, are found to place very decided limitations upon the justifiable expenditure of capital in this direction.