The burning question – rebuild or refurbish?

23rd May, 2023 | No Comments

What should building owners do when faced with the need to replace a run-down B to C grade building and achieve a 6 star Nabers rating: pull down and rebuild, or refurbish?

This burning question was covered at the PFA 2023 Conference, in a discussion facilitated by KPMG’s Rhonda Lenardon and featuring Zoe Ferrari, Investment Manager at ISPT, and Joan Ko, Principal, Australasian Climate & Sustainability Services Leader, Arup.

Assessing whether to rebuild or refurbish is far from straightforward. Building owners need to consider many different factors, understand the key inputs and how they are measured, before understanding when a refurbishment is worthwhile – or if they are better off starting again.

Here are five key insights from the discussion:

1. Building quality
There is no “one-size-fits-all” answer for B and C grade buildings. Every building needs to be assessed on a case-by-case basis – building by building, market by market. Buildings will vary according to age, efficiency, and fit out.

Firstly, what is the quality of the building, and is the building highly utilised? Is it safe and meet current accessibility standards? Some are clearly too good to tear down, whereas other buildings may be refurbished but still finish up as a second-grade asset due to issues such as floorplates, location and so on.

2. Assessing sustainability
Sustainability needs to be assessed in total, considering the entire sustainability journey of a new building or a refurbishment. Buildings need to be efficient, responsible and provide tenants what they want outside of the office space itself.

Consider the possibility of demolishing buildings in a way that means materials can be reused. The cost of waste disposal is going up (landfill costs have tripled in Victoria), not to mention impacts on the carbon footprint.

3. Embedded carbon
Understanding embedded carbon can be complex but is part of how developers calculate scope three emissions across the life of a project (reporting scope three emissions is not yet mandated by the Australian government, but is now becoming part of the lending criteria for sustainability linked loans).

Whether refurbishment or rebuilding, the carbon factors for each need to be considered – though it is currently often easier to measure embedded carbon for new builds.

Finding embedded carbon for existing buildings can be extremely challenging without detailed knowledge of how and when the base building was constructed.

4. Are sustainable upgrades even possible?
Refurbishment may also bring challenges with upgrading technology to lower emissions, such as electrification, which can eat up a lot of space in a building. Newer electric technology is not necessarily like-for-like when compared to the existing gas systems in older buildings. These buildings were not designed for electrification, and may have physical constraints which prevent electrification conversion.

5. Building potential
Owners need to consider the building’s amenity and whether it can be improved in the building’s current location. Structural questions include whether there is potential for more efficient floorplates, and whether it will be possible to create spaces which will be desirable for tenants and their employees. For example, floor-to-ceiling heights may be an issue.
Combining these factors with knowledge of the building quality, sustainability, and carbon factors should provide more clarity regarding refurbishment, and just how much improvement is needed. Or whether it’s time to break out the wrecking ball.

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