BUILDING CONSULTANCY TODAY - WINTER ISSUE

"It’s never the right time to spend money on building maintenance, but neglecting it can have serious consequences"

Preventative Maintenance

 

Heating failure in a multi let office building on the coldest day of the year leaving tenants unable to work. A leaky distribution warehouse roof causing damage to valuable stock during the critical Christmas trading period. The failure of automated doors or escalators in a busy shopping centre. It’s never the right time to spend money on building maintenance, but neglecting it can have serious consequences.

Well organised clients will have Planned Preventative Maintenance (PPM) strategies in place to ensure that their buildings and their respective engineering systems are well maintained, so that the risk of unplanned failures is minimised.  PPM helps smooth expenditure over time, provides a clear logic for landlords to show tenants in support of claims for service charge, keeps service charges themselves at lower, more competitive levels and offers a useful look forward, highlighting the pattern of future expenditure.  Building value is so often linked to condition, that there are compelling commercial reasons to keep buildings in good shape.

Why is it then, we see so many major investment assets, portfolios even, without any PPM strategy at all?

The first answer is that even prudent investors are often driven to think short term, especially in an active market. Why plan for three or even five years ahead when the asset may have been sold by then. Somehow the positive attitude of always being prepared to trade assets mitigates against planning to hold something for the long term. 

Then there is money. PPM creates a set of defined future cash requirements that need to be funded.  Owners often like to maintain as much flexibility as possibility. Even though tenants meet the cost of repairs through service charges, the actual level is an important barometer of the asset’s appeal to occupiers.  For example where there are voids or new tenants to find for empty floors, a low service charge will help address both. Rightly or wrongly PPM can be seen as spending money before it needs to be spent.

Finally, there is human nature. Why fix it till it’s broken?  Especially when there are competing priorities for capital, and a low service charge, at least on the face of it, is more appealing commercially.

Decisions not to adopt PPM have their logic. Owners will hopefully deal with the rain and snow falling through the roof of their shopping centres just before the January sales with same degree of rationality. 

Link to Q4 newsletter homepage


Zahir Bocas

Director

Zahir Bocas

T: +44 20 7182 3634
zahir.bocas@cbre.com

Matthew Prior

Associate Director

Matthew Prior

T: +44 1179435783
matthew.prior@cbre.com

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