Refurbish or rebuild?

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As the dust settles from Covid-19, building owners are looking to reposition their assets in a market that has been turned on its head. How do they answer the tough questions and make a fast decision?

Whether to rebuild or refurbish is a vexing question for most building owners at one time or another. Many factors come into play – the age and condition of the asset, budget, costs, time, financing, as well as the loss of income during rebuilding or the opportunity cost from refurbishment.

But Yardi’s regional director for Asia Pacific, Bernie Devine, says five trends are reshaping real estate and each brings new questions for owners looking to reposition their assets.

  1. Health and wellbeing
    Healthtech slid into the fast lane in 2020, with a record US$5.4 billion in megadeals struck in just the first half of the year, according to McKinsey. The proliferation of personal healthtech has “upped the ante” for building owners, Devine says. As people look for reassurance that their spaces are healthy, the question for building owners is: Can I create a smart spine in my existing asset?
  2. Smart systems
    Smart buildings are the backbone of smart cities – a market that analyst Frost & Sullivan predicts will reach US$2.46 trillion by 2025. Smart building technology can deliver immediate cost savings, drive down energy bills and reduce maintenance costs. “The smartest buildings are also equipped with the right tools to understand and respond to customer preferences and to deliver a better experience,” Devine says. “So, ask yourself: ‘Is my building smart for people?’.”
  3. Flexibility first
    Workplace flexibility may be here to say, but Devine says flexible space shouldn’t be confused with coworking. “It will also be flexible and adaptable to climate change, pandemics, shifts in customer demand – you name it,” Devine says. “The big question for asset owners is ‘Will my building be able to flex and adapt to these big changes ahead?’.”
  4. Experience economy
    Real estate companies are in a rapid race to give building occupants more than just what they want. They must also anticipate their needs. The question for any building owner looking to refurbish or rebuild? “Can I create a great experience?” Devine says.
  5. Climate action
    Green, low-energy buildings are higher-value, lower-risk assets that routinely achieve higher sale premiums and attract and retain more tenants. “As investors and owners manage the risks associated with the transition to a lower carbon economy, the question is clear: ‘Is my asset climate ready?’.”

How do building owners answer these questions to make the right decisions? “They use the right tools to collect the right data so they can do the right analysis – and do it quickly,” Devine concludes.

To learn more about whether to refurbish or rebuild, and to learn how technology can help, download Yardi’s latest whitepaper.

 

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