If we listened to some agents we would not ever have to look at a building. Just multiply the floor area by the going rate for the area and we would arrive at the price. Or take the rental and the prevailing accepted yield and we have the value. But the market doesn’t work quite that way because some buildings are more equal than others – to paraphrase Orwell.
And that “ some are more equal than others” is becoming increasingly important in determining value. Because the factors which lower the value of a building are becoming increasingly costly to bring up to an acceptable standard. And that acceptable standard is increasing all the time.
What are some of the factors we look at in determining the value of a building?
That is, apart from the obvious of position and standard of construction.
Many of these aspects are fixable – but of course there is a cost to fixing (or upgrading).
Generally the most expensive is the roof. Often it’s not even the iron roof – it’s the skylight. And skylights last about half as long as iron, and cost twice as much to replace.
Electrics: The old ceramic fuses found in so many buildings are no longer legal. But then so often neither are the fuse boards themselves. Look also for all metal 3 phase plugs. They will need replacing also.
Roller Doors: There are a surprising number of roller doors which are not motorized and/or have never been serviced. The lack of a motor is not just an inconvenience for the occupier – it actually puts more strain on the door as it goes up and down, which obviously wears it out just that much sooner. And it’s commonsense that failing to service a roller door will shorten it’s useful life.
Air Conditioning: Rule of thumb is that aircon systems last about 15 years. And with substantial numbers of our industrial stock built in the 80’s and 90’s, many air conditioning units have gone well beyond their expected life.
Lighting: The minimum standard now for lighting is LED, and particularly for lighting in warehouses. We anticipate that bulbs for old style hi-bay lights won’t be able to be sourced for long. And if they are, the cost of replacing them with present day health and safety rules means it becomes cheaper to replace with LED. But how many building owners have done this?
Carpet: Often the standard of carpet that is laid in new builds is intended only to sell the building, but not last beyond the initial tenant. Carpet can be a relatively cheap floor covering, but it is yet another cost to be factored in when a building needs to be brought up to standard.
Add all these costs together, and it can make a substantial difference to the value of a building. Which means that formula of $ per square metre could be right on the mark – or substantially different, depending on location, building standard and how well it has (or has not) been maintained.