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Cantilevered Steel Column Additions

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I'm not a frequent contributor to this list, but I hope I can still get some
input from some of you:

I was approached by a contractor about helping him design a second and third
story residential addition over top of an existing single story small office
(20' x 50', standard wood construction).  Because the existing structure and
foundation are of unknown (and questionable) quality, he wants to consider
designing the new structure up on cantilevered steel tube columns, outside
and structurally separate from the existing building (leaving the existing
flat roof in place).  I don't have experience with this type of system for
an addition, though I know it's used.  It seems viable from an engineering
standpoint, but I was warned by an architect friend that this type of
construction could create moisture-proofing problems because the upper
structure is so much more flexible than the lower structure.  Even light
winds, or a heavy truck passing,  can induce differential movements and
break waterproofing seals. 

I'm wondering how this is handled normally.  Can separate building membranes
be installed without creating an architectural monstrosity?

If I were to design the steel columns to take all the design lateral loads,
but combine the systems(locate the columns within the walls and tie
together), this would lessen the impact to the building membrane under light
lateral loads, however, there would be some stiffness compatibility issues
between the columns and the existing walls.  The existing walls would have
to rack a certain amount before the columns would even be contributing to
the lateral force resisting system.  How far can I expect that a wood wall
could rack before it has lost vertical load carrying integrity?

This is San Diego, zone 4, 70mph wind speeds.  

Karen Casano. P.E.
San Diego, CA

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