Money in Your Pocket

BY MICHAEL GRAY CHARTERED BUILDING SURVEYOR
Smart InvestingSpending less on your property makes good financial sense right? Well, that depends. A short-sighted ‘cost-saving’ approach to constructing and maintaining property generally just defers a greater expenditure until a later date.

This might be good for short term cash flow but it’s rarely cost effective in the longer term. However, there are ways of reducing your total property costs with even a few ‘win-wins’ to be had.

Life cycle costing, as the name suggests, considers all of the costs associated with a building from breaking ground for the first foundations up to its demolition. It takes into account not only the cost to build, but the cost of running and maintaining the building. This is a specialist area requiring input from building and quantity surveyors, and mechanical and electrical (M&E) engineers. Other specialists, such as valuers, may also be involved.

Whether or not you choose to undertake a full life cycle cost exercise on your new building design, here are 5 tips that should help you lower your property costs and improve your overall returns:

1. START EARLY

Involvement at concept design stage has maximum influence. The design and choice of materials, finishes and HVAC plant will all impact on future cash flow. Buildings that are ‘out there’ may look great and win architectural awards, but that’s no guarantee of performance. Once the media has left you need a building that’s reliable year after year despite the rigours of our New Zealand climate, without costing you a small fortune – or a big one for that matter. A technical review at design stage will flush these issues out before you’re stuck with them. Involve your maintenance team – they are at the coalface looking after your building for years to come and, believe me, they know what makes for an easy or a hard life and that often translates to dollars.

2. KEEP IT SIMPLE

The line of thinking that says air conditioning equals quality is being challenged by sustainable design. Careful design can provide premises that can be comfortable for practically every day of the year without the need for complex air conditioning systems. No air conditioning means no servicing costs and no capital replacement programme every 15 years or so. It can even mean a cheaper build cost and an achievable 4 or 5 star Greenstar rating if you’re so inclined – which equates to higher capital values (see IPD indices). Oh, and lower energy and running costs equates to happier tenants. M&E can be great, but designing simpler buildings that work with nature rather than fight it head on has clear benefits.

3. DON’T DISMISS A PREMIUM

Sometimes it’s worth spending a little more, whether it’s for new buildings or old. Look at the bigger picture. Hell, get your calculator out and do a discounted cash flow forecast if you’re feeling bold. How soon will you have to replace that widget? How often will you need to maintain it? Low cost is not the same as good value. If you drive a recent model diesel German car, you’ll get comments about the expense. Yes, they’re more expensive, but you’ll get 6l/100km from them and, with the right maintenance, they only need a service every 20,000-30,000kms. If you can live with it sounding like a tractor (and the image), they’re probably one of the cheapest cars you’ll ever own. For buildings, think LED lighting.

4. PLAN AHEAD

Most buildings aren’t new. You’ve missed the boat on influencing the design but you’ve still got up to 50 or more years to influence the building’s performance. Have a forward maintenance plan prepared so that you know what you need to do and when. Not only will this help you budget for the peaks and troughs in maintenance costs, it will also steer you to doing works when they’re needed to stop further deterioration and ultimately having to spend more than is necessary.

5. ALWAYS LOOK FOR OPPORTUNITIES

Even with existing buildings there are opportunities to make improvements that will save you money. With your new maintenance plan in hand (see point 4), use this to programme improvements as part of your maintenance works. The result is that the improvements cost a fraction of what they would otherwise have done and, hey presto, you’ve trimmed your maintenance, operating or future capex costs in the process.

In summary then, achieving lower overall property costs requires us to look beyond tender prices, year-byyear opex or a ‘wow’ factor design. Carefully designed and maintained buildings are cheaper overall in the medium to long term. They make better workplaces, which means higher tenant demand and retention. If you’ve got good in-house facilities and maintenance management, take the time to listen to them. External consultants with the necessary skills, like Prendos, can help bring this all together for you. Or even carry out a full life cycle cost exercise if you need it. Wherever you’re at with your property, there’s money to be saved. So what are you waiting for?

To find out more about our Commercial Property Consultancy services call 0800 PRENDOS or email [email protected].

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