Process

Overview

City ApartmentsThere are a number of issues to consider when undertaking a refurbishment. Owners should be looking for opportunities to improve the return from the property. This may include upgrading the building services, increasing floor space ratio, converting the space to a more appropriate usage and developing additional car parking.

A strategic refurbishment programme needs to consider the following factors:

● The tenancy schedule
● The timing of construction costs
● The downtime in the rental income stream
● The most efficient construction approach
● The leasing plan for the property
● The prevailing market conditions.

When embarking on a refurbishment, a checklist should cover the following issues:

● What tenants want – what are tenants demanding from their space?
● Heritage requirements – what are the compliance regulations?
● Sustainability & ESD – tenants are increasingly using ‘green’ design as a criteria for location selection.
● Compliance – major refurbishments require compliance under several building regulations, including the Building Code of Australia (BCA).
● Change of Use – this is likely to result in a change of classification under the BCA as well as a change of use under the Adelaide (City) Development Plan.
● Duty of care – requirement for the tenants, contractors and general public.
● OH&S – legislation exists around access and essential services including fire systems and emergency lighting.
● Building services – tenant requirements are currently focussed on back-up energy, air conditioning, lift systems and security.
● Dispute resolution – disputes can often compromise the timing and quality of the project. Provisions for this should be built into the contract.
● Minimising disruptions – a plan needs to be communicated to tenants demonstrating the owner has taken every effort to minimise the impact.
● Moral rights – building owners should consult the original design team where possible, prior to making modifications to the external façade.

What Tenants Want

Virtually all recent construction activity in the Adelaide office market has been tenant led rather than speculative. These tenants have shown a preference for purpose built accommodation aligned to their corporate objectives.

Typical requirements are greater energy efficiency, a more efficient floor-plate with a side core rather than a traditional central core and better building services. Given that the requirements of large tenants can be better accommodated in newer buildings, it is not surprising that new or refurbished buildings typically outperform older secondary stock in achieving higher rentals and lower vacancies.

Table 3: Changing Tenant Requirements.
Source Jones Lang LaSalle

However, many smaller tenants are price sensitive and will be drawn toward lower grade space, (see Refurbishing Lower Grade Buildings). It is therefore important to know what type of tenants will be attracted to the asset, what do these tenants want from a building and what has worked for other similar buildings?

Compliance

Compliance with development and building legislation is required prior to embarking on a refurbishment programme. In the first instance it is advisable to contact the Adelaide City Council for guidance on a specific project and to determine if a Development Application is required.

Under the Building Code of Australia, fire safety regulations often present the most onerous and costly compliance matter to owners undertaking a refurbishment programme. Requirements include items such as emergency exits, fire detection systems, emergency warning and intercommunication systems, fire sprinklers, and emergency lighting.

Building surveyors may withhold certification and require modifications if builders do not comply with legislative provisions concerning access and facilities for people with a disability. Disability discrimination claims under state and federal legislation may result in orders for the building owner to pay damages and undertake reasonable acts such as improving access.

Amendments to the Commonwealth Disability Discrimination Act (DDA) are currently being considered. When they come into force it will be unlawful to discriminate against people with disabilities with regard to premises access.

For further details on requirements that projects might be obliged to fulfil, contact the Development Assessment Team at Adelaide City Council on (08) 8203 7185 or (08) 8203 7203.

Change of Use

An alternative to a full office refurbishment may be a change of use or conversion to strata offices. Numerous former office buildings have been converted to other uses, with some of the more prominent ones listed in Table 4.

Both Franklin Central Apartments and the Medina Grand Hotel are heritage listed buildings, with the conversions offering accommodation with a high level of character not normally provided in modern apartment and hotel developments. Such developments present the owner with a point of difference that may assist in marketing the building.

Strata titling an office building provides an opportunity for small companies to buy as an alternative to renting. It also allows small investors to purchase into well located CBD property that may have been otherwise price prohibitive.

Table 4: Selected Major Change of Use Projects in Adelaide CBD

For further details on possible change of use issues and possibilities, contact the Development Assessment Team at Adelaide City Council on (08) 8203 7185 or (08) 8203 7203.

Duty of Care; OH&S

Owners have a duty of care to provide a safe working environment to all building users. To comply with OH&S regulations, building owners and refurbishment contractors are required to provide adequate access in and around the building during the refurbishment process.

Additionally they are obliged to ensure the continuation of essential services during works such as fire detection and paths of egress and exit to ensure that occupant safety is not compromised during the works.

Other hazards to existing tenants, their staff and their business operations that could lead to public liability claims include;

● Potential flooding
● Blackouts and interruptions to the power,
● Data and telecommunication systems
● Disturbance of hazardous materials such as asbestos products.

Both owners and contractors risk substantial fines if they are found to be in contravention of OH&S regulations.

For further details contact SafeWork SA on 1300 365 255 or www.safework.sa.gov.au

  
Building Services  

When undertaking a refurbishment, owners should consider the building’s standby diesel generator capacity. If it is not feasible to include the provision of standby diesel generator capacity, owners should at least provide dedicated space in plant rooms for tenants to install their own generators.

In older buildings lift systems tend to be outdated and perform poorly. Simply refurbishing the lift car interiors and complying with disability access provisions might not be enough for savvy tenants who may demand a more intensive refurbishment programme. This would include latest

generation door operators on the landing doors, the installation of current technology controllers and lift dispatching systems.

The building access control system and security environment is also an area which is becoming more important and should be addressed as part of a refurbishment project. Owners should consider taking a holistic approach to security systems, not just the access control system in isolation.

The provision of a staffed security presence at reception and barriers or turnstiles is gaining popularity. The upgrading of the building management system also allows more integrated control, better efficiency and therefore reduced operating costs.

Air conditioning is still one of the most common complaints by tenants across Australia. Often corners are cut during the installation to minimise the cost of the works or the system is not commissioned in accordance with the original design intent. This can be avoided through a robust design which acknowledges energy efficiency and includes a thorough testing and commissioning regime.

Complaints can also arise when interference is caused by electromagnetic radiation generated by unshielded or poorly configured electrical cables, adjacent substations and some older lift installations.

Developers should consider the harmonics associated with the electrical installation and the potential impact on tenant equipment and building services. Where possible, owners should install power factor correction equipment to minimise demand tariffs and hence the ongoing electricity costs for the building.

Dispute Resolution; Minimising Disruptions

Refurbishment programmes inevitably cause disruption. The key is to have a well developed tenant management and communication plan to keep tenants well informed about disruptive works.

Building owners need to ensure the works with most impact are conducted outside working hours.

When undertaking a refurbishment, the works need to comply with the ‘quiet enjoyment’ provision of existing tenant leases and those of neighbouring properties.