Rehabilitation versus demolition and redevelopment : a value-based decision framework for private commercial properties

Ohemeng, FA

Abstract

Property developers, investors and financiers usually have reservations about
the investment performance of rehabilitated and refurbished properties.This is
due to the uncertainties introduced by low rental income, higher yields and
shorter leases associated with secondhand properties. This situation is thought
to be changing as more and more successful schemes are reported in the
property and business press.
What is changing attitudes is the improved economics of refurbishment
schemes. Occupiers are seeking to reduce occupancy costs after the last
recession. Rehabilitated properties which can offer facilities comparable to new
build but at a fraction of new build rents are therefore becoming attractive.
Furthermore, recent innovations in services and communication technology is
making it possible to service older properties to the same level as new
buildings. This is creating investment value in buildings that might otherwise
have remained unlet.
Despite the improved situation, there seemed to be no formal framework to aid
building rehabilitation versus redevelopment decisions in the private
commercial property sector. The critical decision determinants are scattered
over several publications. What this research has done is to assemble all
factors within a single framework.
Examining the nature of buildings, it is apparent that different groups evaluate
buildings differently. To some they are symbols of prestige or image and to
others they help create the environment we live in. Yet more, some see
buildings as shelters and investment assets. In the private sector, the main
actors that influence property development are occupiers, developers and
investors. Each of these actors evaluate buildings on different criteria. This
makes the building rehabilitate-redevelop decision a conflicting multi-criteria
problem. The framework created by this research is therefore based on
Multiattribute utility theory (MAUT).
The research identified the objectives of building renewal from the perspectives
of occupiers, developers and investors using the principles of value-focused thinking. The common indicators linking these objectives became the decision
attributes over which utility and value functions are to be created. By the
research results, the option chosen in the decision scenario described above is
determined by the attributes: profit, maintenance cost, energy cost, floor to floor
height, floorplate area, floor load-bearing capacity, floorplate width and on-site
car parking provisions. The preferred option is the one that maximises the
subjective value of the decision maker over these attributes.

Citation

Ohemeng, F. Rehabilitation versus demolition and redevelopment : a value-based decision framework for private commercial properties. (Thesis). University of Salford

• Thesis Type: Thesis
• Deposit Date: Sep 26, 2011
• Publicly Available Date: Sep 26, 2011
• Award Date: Jan 1, 1998