The impact of the coronavirus has turned many sectors of the commercial property industry on its head. With all challenges come opportunities and acquisitions, sale and lease back arrangements and equity funding are more relevant now than ever. With the current market conditions there are now some areas where additional focus needs to be given to ensure the advice given and capex costings remain relevant. I have set out some of the areas that current day Technical Due Diligence needs to be alert to and the importance of awareness from building surveyors and MEP consultants.

Capex upgrades: Older multi let buildings are going to require upgrades to allow them to fulfil occupier requirements. Reducing contact points, improving air filtration and increasing circulation space within communal areas are all key areas to upgrade. Purchaser intentions need to be established before providing budget costings.

Capex strategy: While maintenance and repairs to the building fabric will remain necessary, during challenging times there is an increased adoption of a more essential strategy to such works. Stretching out repairs and replacement works is quite common. Capex forecasts will therefore need to reflect the intended approach.

Defect diagnosis: In adopting an essential approach to maintenance, it is more important than ever that any existing defects are correctly diagnosed to allow the most cost-effective repair can be carried out. This could mean the difference between undertaking an isolated roof repair rather than full replacement. Making the correct diagnosis could greatly influence costs and potentially impact the decision to proceed with a purchase or receiving funding.

MEP documentation: With a higher likelihood of struggling companies reducing their operation costs, there is an increased need to ensure that plant is being properly maintained and remains fully operational. Increased focus and resource will be needed from MEP engineers and a less optimistic approach adopted if evidence of previous work can’t be provided.

Tenant responsibilities: There is an increased risk of challenged businesses folding leaving their premises in a fitted out or dilapidated state. Equally more solvent companies may simply fail to fulfil their dilapidation responsibilities including failure to pay a settlement. With this in mind, clients may find it useful to understand potential risk by having surveyors provide a forecast of dilapidation liabilities.

Extra vigilance: When inspecting properties, surveyors often have the luxury of being granted access to all areas, speaking to various staff and being able to see buildings in operation. This insight can be very useful and this is especially relevant now when tenants and occupiers may be adapting how they use buildings and or space due to varying market conditions. For example a struggling business may be subletting space without approval, or a thriving industrial premises may be needing to store additional products or materials and as a result may be doing so in an unsuitable area that has insufficient structural strength or lacks fire protection. Being aware of potential issues and understanding the background of the use and occupants means useful information can be obtained and fed back.

Ben Woodcock

Founding Director, BWC Consulting Limited

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