PROPERTIES - THE PHYSICAL ENVIRONMENT
valuer should investigate the following factors when valuing an
Type of construction,
year built, standard of finish, size, presentation of the foyer, the
amount of retail space (if any) and the potential for future
development. Size and standard of foyer.
Location or access of building to the CBD or local centre, pedestrian
flow, views, aspect and access to public transport. A locality sketch
should be included in the valuation report illustrating accessibility.
factor is measured by distance from the centre of the CBD or a major
transport node such as a railway station. This can be scaled from a
Internal areas, floor
size, location of the service core (for example is it a central whole
floor plant area?), toilets (male and female on separate floors?),
tearooms, cleaners' facilities, fire escapes (for example is there
direct access to the street or through the foyer?), size of floors
and % of floor occupied
CONTROL AND PREVENTION:
Fire detection and
safety factors are most important, as the new owner may be liable for
major costs in upgrading to current requirements. Does the building
have sprinklers or smoke detectors only?
If there are only
smoke detectors, there may be an outstanding order to install
the condition and availability of storage tanks, hydrants/fire hose
reels, booster pumps etc. Are the floors fire rated? Are there any
fire orders over the property by either the local council or an
appropriate fire control body for example, the Fire Brigade (NSW) or
the Fire Safety Committee (SA).
Location of the air
conditioning plant. Are there separate air handling units on each
floor (a zoned system)? The type of plant, including the number of
cooling towers, chillers and boilers. Are they gas or oil fired? Age
of plant and condition. Will a major overhaul be required in the
Check and note on the
plan the position of columns for a typical floor. Column free office
space has more value than floors with columns because it allows the
owner/tenants greater flexibility in subdivision design and a greater
area to lease. Post stress concrete construction has the advantage of
providing column free areas.
LIGHTING: Tenants prefer natural lighting wherever possible. Therefore,
the valuer should determine how much natural light is available per
floor. Note the size of windows. Are there views to take advantage of?
See Occupational Health and Safety Standards (OH & S) later.
Any other services
provided and their quality. Who owns the partitions?
Check for the
presence of asbestos for all pre 1975 buildings. Removal takes time,
is disruptive to the occupants and very expensive.
LETTABLE AREA EFFICIENCY:
The lettable area
efficiency of a building is an index calculated as follows:
= lettable area index
= net lettable area of building - see below.
= gross building area – see below.
National Public Works Conference standard for the measurement of
gross floor area, fully enclosed covered area and unenclosed covered
area is attached.
fully enclosed covered area (FECA) can be equated to the net
lettable area used by renters of commercial property and the
unenclosed covered area (UCA) can be added if part of the leasing
professional offices may have an entertainment balcony off the
boardroom which should become part of the net lettable area.
LETTABLE AREA (GLA)
that the gross floor area (GFA) under the Conference standard
is not the same as gross lettable area (GLA) used in
commercial lettings. The gross lettable area is the area of
the building measured by outside dimensions but ignoring external
structural features such as columns.
GLA is the area used to rent industrial/warehouse, houses and small
commercial properties. To avoid confusion use either NLA or GLA after
valuer should be able to classify the subject building according to
its power consumption. Inefficient buildings will consume much more
power than modern "smart" buildings leading to functional
obsolescence and higher operating costs. The valuer will have to
determine whether or not such obsolescence can be cured.
cost of power will increase for unusual electronic equipment,
catering equipment etc in the building. It is not unusual to find
buildings with an energy consumption of several times that shown in
the tables below. This is caused by:
equipment for example, old fashioned air conditioning and lifts
operation. Encouraged by the fact that the tenants pay most of any
increase in outgoings.
- poor or
obsolete design. for example, large window areas facing west .
- the use of
unusual heavy load equipment. For example, a computer headquarters.
range below been derived from temperate climates in Australia. In
tropical and colder climates the energy consumption is higher:
conditioning, fans etc: 60- 130
conditioning, refrigeration: 60- 100
lighting & power: 49- 80
lighting & ventilation: 0-50
light & power: 185-410
light & power: 150-300
light & power: 435-710
air conditioning: 150-300
hot water service: 5-30
TOTAL HEATING/FUEL: 155-330
Net lettable area.
2 500 operating hours/pa
Property Council of Australia.
ENERGY = the sum of electricity, gas, and fuel oil costs.
HEALTH AND SAFETY (OH&S)
number of the above factors affecting investment properties have been
determined as Australian Standards for Occupational Health and
Safety. These standards have become of such importance in the leasing
of commercial buildings that the valuer must determine whether or not
the subject building complies and most likely if it doesn't, it will
have to be upgraded to the standards. The following is a summary of
some of the most important standards:
AND AIR CONDITIONING
Australia most people work comfortably at temperatures between 20
260 Celsius. The preferred winter temperature is usually about 20
degrees lower than in summer. The Australian Standard AS 1837
Code of practice for application of ergonomics to factory and office
work recommends a temperature range of 21 24o
Celsius for both offices and factories in summer.
temperatures can be localised. A desk situated in direct sunlight
will be much warmer than the average temperature in the office and a
desk situated directly under an air conditioning vent can be cooler
than average. If there are continual complaints that the office is
too warm despite the reading on the thermostat showing the
temperature to be within the acceptable range, check that the
thermostat has not been situated directly in the air flow from an air
older personal computers can generate as much heat as small electric
bar heaters raising local temperatures above the room average. This
problem can be compounded by the clustering of computers in one
particular section of the office.
of the complaints of discomfort in air conditioned offices occur
in the wintertime. The cause of the complaints can be because if the
air temperature is about 24oc this feels hot to the worker
coming into the building from the outside air. The problem can be
made worse if the air movement is less than 0.1m/second.
refers to the amount of water vapour in the air. The optimum comfort
range for relative humidity is 40 60 %. Low humidity can cause
dryness of the eyes, nose and throat and may also increase the
frequency of static electricity shocks. Relative humidity above 80 %t
can be associated with fatigue and reports of "stuffiness".
If relative humidity is consistently high or low call in an air
conditioning expert to conduct a review.
refers to the movement of air and rate of fresh air input. Air
movement of less than 0.1m/second can lead to stuffy rooms whereas
above 0.2m/second draughts can be felt. The Australian Standard AS
1668 Part 21991 Mechanical ventilation1or acceptable indoor air
quality sets out the absolute minimum requirements for fresh air. For
each person a minimum rate of 10 litres/second/person for general
office space or 10 litres/second for every 10m2 of floor
space is recommended.
contaminants in the office can include bacteria, viruses, mould
spores and dusts, solvent vapours or chemicals generated or used in
the building. Air conditioning units that do not provide adequate
amounts of fresh air can cause high levels of CO2. Stale
air due to poor ventilation and excessive heat build up or
humidity can also contribute to air contamination. Appropriate
control measures for the reduction of air contamination include:
- effective air
- ensuring that
adequate amounts of fresh air enter the building
- maintenance of
air conditioning units, including regular cleaning
- preventing the
obstruction of vents
equipment using solvents in areas with substantial air movement and/or
installing local exhaust ventilation.
tobacco smoke is an indoor contaminant and there is growing
recognition that nonsmokers may suffer adverse health effects through
inhaling tobacco smoke. Organisations are increasingly expected to
limit passive smoking risks in offices in the interest of their
employees and clients.
and laser printers produce ozone gas during operation. It is possible
to smell ozone at a concentration of between 0.01 and 0.02 parts per
million (ppm), well below the Australian Exposure Standard of 0.1ppm.
Ozone does not build up in the air.
breaks down into oxygen quickly after is it released into the air. At
concentrations above the Exposure Standard Limit ozone can cause eye
and upper , respiratory tract irritation, headache and. temporary,
loss of the ability to smell.
carried out by the WorkCover Authority of NSW indicate that modern
photocopiers fitted with an ozone filter do not present any hazard to
health, provided they are properly maintained. Preliminary
investigations on laser printers indicate the same result.
incidence of illness is significantly higher in some buildings than
in others. The symptoms that characterize "sick building
syndrome" are sore eyes, running nose, headaches, mucous
membrane irritation, dry skin, dizziness and nausea. No single,
specific cause has been found. It is believed that the syndrome is
caused by a combination of poorly adjusted ventilation, air
conditioning, temperature, humidity and lighting and psychological
factors such as stress, management style and tedious work schedules.
the solutions to each individual aspect of the office environment
covered here . may help in alleviating the symptoms of the sick
basic requirements for adequate fighting are that the work must be
easy to see and the light comfortable to the eyes. Illumination is
measured in units of LUX (lumens/m2). Suitable light
levels based on Australian Standard AS 1680 1990 Interior
background: 200 lux
- routine office
work (typing, filing): 400 lux
- work with poor
contrast (proof reading): 600 lux.
differences in illumination between adjacent areas should be avoided.
Ideally the surrounding area should be slightly lower in luminance
than the task area itself, except in special cases such as viewing
outlines against a luminous background. Light should fall from the
side rather than from the front to avoid reflections on the work
causes visual discomfort and is usually caused by light sources,
which are too bright or inadequately shielded.
determine the level of reflectance as follows:
reflects 75% or more of light.
- light colours
50% 75% (subdued cool colours).
- medium colours
20% 50% (bright warm colours).
- dark colours
20% or less.
or off white is recommended for ceilings, as they should reflect
greater than 80%of light. Walls should have a reflectance between
50% 75% and have a gloss or semigloss finish. Walls near windows
should be light in colour whereas those away from windows should be
medium coloured below eye level.
should reflect less than 20% of light and therefore should be dark
coloured. The use of colourful posters and pictures relieves the
monotony of the surroundings and also provides relief from eyestrain.
good rule of thumb for personal space is to allocate 6.25m2
per individual workstation, including furniture and fittings, but
excluding passageways and amenities. 10m2 per person for
the general, air conditioned office areas including passageways
and amenities, is recommended in Australian Standard AS 1668 Part 2
1991 Mechanical ventilation for acceptable indoor air quality.
THE NET RENTAL INCOME "PASSING" RENTS AND RENTAL
capitalization method requires the determination of the expected
rental net income to be received in the future. The valuer has to
determine both the market rental value and existing rents (passing
rents) of the property. For large complex office buildings in the CBD
this part of the valuation is most difficult. In fact, some valuers
claim that the determination of rental equivalents from a complex
rental schedule is 90% of the valuation.
leases are becoming more complex, for example, a recent commercial
lease in Sydney ran to 86 pages long and another consisted of 46
pages with smaller typeface! The valuer is concerned with a typical
lease agreement appropriate for the subject property. The overall
rent determined after analyzing the rental schedule is the market
rent if the agreements have met all the criteria in the willing
landlord willing tenant theory. The terms and conditions of
particular importance in the lease agreement are:
- the term and
rights of renewal. For example, a 2 yearly rent review clause with
reviews to market rent or according to the CPI increases.
rent being paid under the lease agreement. This will be the legal
rental income until review.
review clauses are most difficult particularly in regard to timing and
method of review. For example, if there is a rental dispute, does the
dispute goes to arbitration or an expert valuer to determine? The
clause usually requires the president of the API to appoint an
arbitrator or independent expert valuer when agreement cannot be
reached between the parties.
pays the outgoings under the lease agreement and any recoveries.
leases require the tenant to “make good” the premises at the
expiration of the lease. Being a standard condition adjustment would
be required if the lease did not have a make good clause (the
equivalent rent would need be lowered) or the make was particularly
onerous (the equivalent rent would need be raised). An example of the
last would be a situation were the floor plate and ceiling panels
were in imperial units and it is difficult to find non metric parts.
are generally standard within a building but this may not always be
the case. In the private sector, the most common commercial lease, is
the Property Council of Australia Lease. The standard form public
sector lease may be the Commonwealth Lease for Commonwealth tenants.
Rental levels of major leases are available from the Land Titles
Office (LTO) if registered.
registration the information is public domain regardless of any
attempt by the building owner/agent to keep it confidential. If the
details of leases in the subject building cannot be determined
because of privacy clauses then a disclaimer to that effect should be
added to the valuation report.