When nothing has been anything like it was before, we’re probably all looking for signs of life getting back to its more familiar patterns, no matter how mundane. So, leaves falling and the crisp morning air signalling the arrival of autumn, getting stuck in school run traffic again and a queue for your morning coffee have all been a surprising source of reassurance. For all of us involved in helping clients buy and sell property assets there has been one more sign we’ve detected in Building Consultancy’s TDD group. There are green shoots of a recovery in transactional activity.
CBRE’s Investor Hub shows that nearing the end of July, the number of signed confidentiality agreements was down by only 17% year on year, a marked improvement from the 74% fall in April and May. This measure of revived investor interest could be a harbinger of a future rebound in commercial real estate transaction activity.
Our TDD teams in the UK and mainland Europe all detect the beginnings of more activity although this time buyers are adopting a sharper focus to risk management. The most significant change has been the practice of appointing TDD specialists to advise on pre-bid due diligence, typically completed on a desktop basis, before either selective or full inspections occur. It’s possible this reflects the practical difficulties of carrying out on-site inspections during periods of lockdown, but we think it indicates something more profound - the value investors are attaching to reliable data about the assets.
Beyond the basic challenge of illiquidity, property’s vulnerability as an investment medium is that it relies on the long term performance of physical assets. Whilst thankfully, building science has taken us beyond the era of the dreaded, value-threatening deleterious materials list, it takes a single tragic event like the Grenfell fire to blight every other building – and there are many – clad with similar components, when the risk they represent is revealed so starkly.
So, for all property investors, knowing exactly what they’re buying has assumed a heightened importance. What’s likely to pull this into even sharper focus is being signalled by the government in the Building Safety Bill which will create additional statutory duties through the ‘Accountable Person’ regime being planned for higher risk buildings. The government is determined to stop the pass the parcel game when it comes to establishing responsibility. Someone has to carry the can for building failures, and as we’ve seen with the principles of corporate manslaughter, that will bring the risk closer to the door of the building owner.
Which brings us back to today’s market; there’s no better time to work on gathering, verifying and organising the essential data on building assets than quiet periods when market activity levels are low . Now it’s clear that purchasers are likely to want to know more, it’s also time to think about how data is collected and kept. We’re increasingly providing clients with building data in digital form through measurement sometimes captured from point cloud surveys or in BIM models where designers’ information can be federated with ours into a holistic building model that has many applications. This detailed digital representation of physical assets also gives owners the opportunity to organise metadata in a way that can help them achieve operational efficiencies before going to market, so potential purchasers see the assets at their most optimised.
Effective Technical Due Diligence is imperative even before a commitment to buy, especially given the volatility of the many factors that determine property value. Whilst we’re always focussed on an intelligent analysis of current short or medium terms issues, we’re also looking at longer term impacts. Now, however, it’s the quality and accessibility of building information that will make a real difference to transaction speed and the buyer’s perception of risk.
If you’d like to continue the conversation or find out more about the ways we can help you manage your building data, just get in touch.