Renovation = Innovation
25th July 2014
Raising finance for new projects is still difficult for developers, as banks continue to avoid higher risk lending. As a result, the proportion of redevelopments has risen at the expense of the dwindling numbers of new build and pre-funded schemes.
However, the emphasis of many developers and fund managers in the UK market has also shifted towards refurbishment of assets. In part, this is due to the relative ease of financing, but also because of the value to be gained from buying heavily discounted ‘secondary’ property in Nottinghamshire, and refurbishing it to a higher standard, or actively managing assets.
Creating something new from something old can be expensive, hard work and risky – but it is extremely rewarding. Okay, so you’re not changing the world or committing yourself to endless selfless acts of philanthropy, but the fact remains that refurbishments are good business logic.
But only if you do it right, of course.
Renovation is a lot more than redecoration. A typical office will be in a building aged anywhere between 5 and 100 years old and on average – at best – it will have been redecorated every 5 years. Instead of slapping another layer of cheap paint on the walls and ceilings and moving furniture over that hole in the carpet, surely the time has come to bite the bullet and be braver.
But whilst occupiers’ requirements move on, the style of many office buildings hasn’t. You might ask yourself: why refurbish? I’d answer: why not? Refurbishment can have myriad benefits, including: increasing a building’s economic life (and therefore increasing rental income); increasing the marketable value of the building; improving its appearance and aesthetic appeal; and – in most cases, increasing thermal efficiency and reduces energy costs; and, fundamentally, it changes how a building functions.
Think about it for a second; what sort of tenant are you going to attract to a run-down second-hand offices? The sort that will probably move on within a year. However, by offering a high quality environment a landlord will be able to attract a higher calibre of tenant.
And it is not just how the building looks you need to think about. Employers now have to comply with legislation around the Disability Discrimination Act, which requires service providers to make ‘reasonable adjustments’ to their premises so that there are no physical barriers stopping or making it unreasonably difficult for disabled people to use services.
Moreover, an Energy Performance Certificate (EPC) rates how energy efficient a building is using grades from A to G (with ‘A’ the most efficient grade). You need an EPC certificate if you market a property.As things stand from 2018 onwards any property that has a rating within band E or below cannot be marketed, so why wait, get ahead of the game and consider this when planning refurbishment works.
But, back to basics. When it comes to refurbishing an office there have long been a list of six Rs that have been at the heart of the principle: Restore; Refurbish; Renovate; Revive; Re-model; and Reconstruct. Use these as a tick-list to secure maximum value from your commercial property, and your new tenants will soon be signing that lease.