5 ways to lower your property costs and improve your overall returns

November 5, 2024
Cutting property costs the smart way - Prendos NZ Limited

In times of economic downturn, it may be tempting to cut back on how much you spend on your properties. But a cost-saving approach to building and maintaining property will generally just defer a greater expenditure until a later date. This might be good for short term cash flow, but it’s rarely cost effective in the long run. You can pay now, or you can pay later, as the saying goes.

However, there are ways of reducing your total property costs sensibly, which can result in ‘win-wins’ when applied in a planned way. Life cycle cost analysis, as the name suggests, considers all costs associated with a building, from breaking ground for the first foundations right up to its eventual demolition and removal.

Life cycle costing considers not only the cost to build, but the cost of running and maintaining the building throughout its lifetime. This will generally require input from several specialists, depending on the building type, usage and systems. But in terms of return on investment, a life cycle cost analysis can add real value when you consider the potential savings and efficiencies gained.

Here are our five top tips to help you lower your property costs and improve your overall returns over the life cycle of a building:

1. Consider building performance early

Thinking about building performance at concept design stage will have maximum influence over lifetime costs. The design and choice of materials, finishes and systems will all impact on building efficiency and durability, and therefore future cash flow.

Engaging a design team with experience in high-performance buildings is the best way to ensure issues such as heating and cooling demand, ventilation and durability in the local climate will be considered as part of the design. A specialist technical review at design stage will also flush issues out before you’re stuck with them.

It’s also wise to involve your maintenance team in the design process if possible – they will be looking after your building for years to come and will know what makes for an easy or a hard life, which often translates to dollars.

2. Keep it simple and sustainable

Designing simpler buildings that work with nature rather than against it has clear benefits.

Sustainable design can provide premises that are comfortable every day of the year, reducing reliance on air conditioning systems. No air conditioning means no servicing costs and no capital replacement programme every 15 years or so. It can also mean a cheaper build cost and contribute to an achievable 4- or 5-star Green Star rating – which equates to higher capital values. What’s more, lower energy and running costs equates to a more desirable property to potential tenants.

3. Prevention is better than cure

For existing buildings, you can’t influence the design, but you’ve still got potentially 50 plus years to influence the building’s performance. Having a preventative maintenance plan prepared will mean you know what you need to do, and when, to keep your building in good shape, as well as what you need to allocate in CAPEX and OPEX to do it.

This will not only help you budget for the peaks and troughs in repair and maintenance costs over the lifetime of your building, it will also steer you to doing works when they’re needed to prevent sudden failure, and ultimately having to spend more than is necessary to carry out reactive maintenance when things go wrong. Not just that, but preventative maintenance works can often be planned and carried out with tenants in place, avoiding long periods of vacancy to carry out emergency repairs and replacements.

4. Spend more to save more

Sometimes it’s worth spending more up front, whether it’s for new buildings or existing ones. Look at the bigger picture and do a discounted cash flow forecast. How soon will you have to replace that equipment? How frequently will you need to maintain it? Cost savings on the purchase price of mechanical systems or HVAC equipment, for example, can quickly fade in comparison to the lifetime servicing, and eventual disposal and replacement costs of cheaper up-front options.

5. Plan improvements along with maintenance

Even with existing buildings there are opportunities to make improvements that will save you money. With a preventative maintenance plan in place, you can also use this to programme improvements as part of your maintenance works. With strategic scheduling and budgeting, those improvements will cost less than they would otherwise, and can also help you trim your maintenance, operating and future CAPEX costs in the process.

Achieving lower overall property costs means looking beyond tender prices and year-by-year OPEX. Well-designed and well-maintained buildings are cheaper overall in the medium to long term. They make better workplaces, which means higher tenant demand and retention. And if you’ve got good in-house facilities and maintenance management, take the time to listen to them as their input can be valuable.

Specialist consultants with the right skills, like Building Surveyors and Quantity Surveyors, can help bring this all together for you, including carrying out a full life cycle cost analysis, and developing a strategic preventative maintenance plan.

Wherever you’re at with your property, there’s money to be saved. Contact us today for a chat about how – just call 0800 PRENDOS or email prendos@prendos.co.nz.