Sunday 1 September 2013

Knowle: refurbishment vs redevelopment

Here is the letter sent to District Councillors, also published in this week's Herald, from researcher Robin Fuller - together with his analysis of the report from consultants Davis Langdon:

From: Robin Fuller
Sent: Thursday, August 29, 2013 3:52 PM
To: mallen@eastdevon.gov.uk ; datkins@eastdevon.gov.uk ; rbloxham@eastdevon.gov.uk ; bbuxton@eastdevon.gov.uk ; sbond@eastdevon.gov.uk ; rboote@eastdevon.gov.uk ; pbowden@eastdevon.gov.uk ; pburrows@eastdevon.gov.uk ; dbutton@eastdevon.gov.uk ; gchamberlain@eastdevon.gov.uk ; dchapman@eastdevon.gov.uk ; mchapman@eastdevon.gov.uk ; ichubb@eastdevon.gov.uk ; tcope@eastdevon.gov.uk ; dcox@eastdevon.gov.uk ; dcustancebaker@eastdevon.gov.uk ; adent@eastdevon.gov.uk ; paul@diviani.net ; cdrew@eastdevon.gov.uk ; vduval-steer@eastdevon.gov.uk ; mgammell@eastdevon.gov.uk ; Sgazzard@eastdevon.gov.uk ; rgiles@eastdevon.gov.uk ; ggodbeer@eastdevon.gov.uk ; pgraham@eastdevon.gov.uk ; shall@eastdevon.gov.uk ; phalse@eastdevon.gov.uk ; thoward@eastdevon.gov.uk ; mhowe@eastdevon.gov.uk ; shughes@eastdevon.gov.uk ; dhull@eastdevon.gov.uk ; jhumphreys@eastdevon.gov.uk ; bingham@eastdevon.gov.uk ; jjeffery@eastdevon.gov.uk ; sjones@eastdevon.gov.uk ; skerridge@eastdevon.gov.uk ; dkey@eastdevon.gov.uk ; jknight@eastdevon.gov.uk ; amoulding@eastdevon.gov.uk ; fnewth@eastdevon.gov.uk ; joleary@eastdevon.gov.uk ; hparr@eastdevon.gov.uk ; gpook@eastdevon.gov.uk ; kpotter@eastdevon.gov.uk ; pskinner@eastdevon.gov.uk ; pstott@eastdevon.gov.uk ; psullivan@eastdevon.gov.uk ; btaylor@eastdevon.gov.uk ; ithomas@eastdevon.gov.uk ; gtroman@eastdevon.gov.uk ; ptwiss@eastdevon.gov.uk ; cwale@eastdevon.gov.uk ; mwilliamson@eastdevon.gov.uk ; twood@eastdevon.gov.uk ; ewragg@eastdevon.gov.uk ; swragg@eastdevon.gov.uk ; cwright@eastdevon.gov.uk ; twright@eastdevon.gov.uk

Subject: £2million-£4.6million to refurbish modern Knowle - Davis Langdon figures

East Devon District Councillors
Sidmouth Town Councillors

Four weeks ago I sent EDDC an assessment showing that they have 2,725 sqm of floorspace in modern, 30-35 year old offices at Knowle, 40% more than they claimed. That floorspace is nearly as much as EDDC intends in a new building. I argued that sale of the redundant older parts of Knowle would pay the costs of refurbishing the newer parts instead. However, EDDC loaded the estimated costs of refurbishing Knowle – £15million they said – by pricing refurbishment of the entire Knowle which has more than double the floorspace they will actually need (see ‘Knowle HQ move can’t be justified’, Sidmouth Herald, 16 August 2013).

EDDC have not replied to defend their figures; only to say that sale of the old Knowle would not cover the costs of upgrading and refurbishing the newer buildings. Since EDDC have seemingly failed to estimate the cost of refurbishing the modern offices, I have done so using data published by Davis Langdon, EDDC’s own consultants on ‘moving and improving’. They assess typical benefits and costs of office refurbishment: (http://www.davislangdon.com/upload/30297_Cost%20Model%20-%20Office%20Refurb_v2.pdf).

They state that benefits include: a better balance of risk and return; delivery 15‑70% quicker than new build; costs 10‑75% less than a new build; an opportunity to support new ways of working; a reduction in the carbon footprint; reduction of the overall environmental impact when compared to a new build.

Davis Langdon estimated costs to ‘remodel, medium refurbishment’ as £807-£1345 per sqm or to ‘renew, major refurbishment’ as £1345-£1883 per sqm (Central London prices, 2012;  south-west prices 89% of this). These costs are for a Category A fit-out – generally what a developer provides as rentable office space.

Using Davis Langdon’s figures, the refurbishment costs for the 2,725 sqm of modern offices at Knowle would be £2.0million-£3.3million to ‘remodel’ or £3.3million-£4.6million to ‘renew’ (at SW prices).

It is obvious that refurbishment of just those parts of Knowle needed by EDDC – mostly buildings 30‑35 years old – cannot possibly cost as much as the £15million quoted for all Knowle buildings, some over 200 years old. The likely costs, in the range £2.0million-£4.6million according to Davis Langdon, need to be properly focussed by pricing a downsized Knowle, using a sensible design brief – not one contrived to match EDDC’s prejudice in favour of moving. I still expect that costs could be met by the sale of unused parts of Knowle for redevelopment as flats.

Effective refurbishment could make the energy efficiency of the modern buildings at Knowle as good as new, and bring the standard of accommodation fully up to date. However, EDDC still wants to build a brand new headquarters costing £6.9million-£7.9million (excluding the price of the land). Building costs are double, perhaps triple, the likely costs of refurbishment.

It is our money which EDDC puts at risk. We already own the Knowle. The potential loss of that amenity without a tangible gain to the people is not ‘cost-neutral’ as EDDC claim. We accept that EDDC’s offices need updating. However, we are entitled to a fair assessment of the real options and the true costs of refurbishment at Knowle, before EDDC can consider using our assets and our money to buy themselves a new building.

Robin Fuller

Refurbishment v redevelopment or new build:
A précis and interpretation for Knowle

An edited version of this full article appeared in 'Building' Magazine June 2012; or find it at  http://www.davislangdon.com/upload/30297_Cost%20Model%20-%20Office%20Refurb_v2.pdf  
Nigel Addy and Peter McCallum of Davis Langdon, an AECOM company, discuss creating and adding value through refurbishment. Interestingly, Davis Langdon were consultants to EDDC on refurbishment costs, but they were only asked to examine full refurbishment of all of Knowle, old and modern, despite the fact that this would have refurbished nearly double the floorspace required.  A précis of their article follows.

So why is there so much excitement surrounding the refurbishment of existing offices?” ask Addy and McCullum. There are many pros and cons for developers depending on size and age of the building and what is required as an outcome. For a developer in our current financial times, there is the need for quick turn around and realisation of an asset, which is not necessarily the same motivator for a business owner wanting to make choices over relocation or refurbishment. Given that the article is written for developers who wish to make money, one should be able to assume that most advantages would also apply to EDDC.

Benefits for developers include:
·    The reuse of an existing asset.
·      A better balance of risk and return.
·      Quick delivery back to market or refurbish whilst in use. Dependent on the level of refurbishment, it is approximately 15% to 70% quicker than new build.
·      Maximising the value of an existing asset – does not necessarily apply to Knowle or EDDC's attitude. But there may be various helpful attributes of the original building, such as car parking allocation.
·      A more affordable approach; refurbishment can avoid the reconstruction of major structural elements yet still retain the benefit of creating a new office space. Depending on the level of refurbishment desired, the cost is approximately 10% to 75% less than a new build. The minimum benefit applies to when only the concrete shell is retained, for example.
·      Reduce the carbon footprint of an existing building. There is a strong argument relating to sustainability that supports refurbishment. The re-use of the majority of an existing building’s fabric and an improvement to the buildings services and performance may result in the reduction of the overall environmental impact when compared to a new build.

They do note that not all property is suitable for refurbishment. For example, "the creation of a generous floor to ceiling height is a key consideration for a refurbishment. Relatively small floor voids are acceptable if the floor to ceiling heights are maximised. With the advance in technologies the need for larger floor voids is not as necessary .... Many older buildings do not have the floor to floor heights to accommodate a 4 pipe fan coil system and a suspended ceiling, whilst simultaneously maintaining an optimal floor to ceiling height." They do go on to explain how to overcome this in terms of air circulation and services and also to stress that a  BREEAM excellent rating can be achieved in a refurbished building.

In terms of a developer considering refurbishment of a building that they are renting out, there are considerations  regarding investment and loss of redeveloping opportunity for some time - this of course does not apply to Knowle if the council were to stay there. They use a Table (below) to consider levels of refurbishment, costs and time 'bought'. Note that costs are per square foot  (cost per square metre is added below their Table). Later models are costed per sq metre. This is how it appears in the article!

Minor refurbishment
Medium refurbishment
Major refurbishment
Investment is focussed on common areas and involves essential repairs only. Often carried out during occupation.

This usually involves a full upgrade of the existing building services and finishes but stops short of major structural alterations. If occupied, then some decanting and phasing of works will be required.
Works include significant structural alterations and may also include the replacement of facades and roof finishes. The complete renewal of internal fittings, finishes and MEP systems. The building is typically unoccupied.
Extension of economic life:
Approx 5 years
Approx 15 years
Approx 15-20 years
Benchmark costs per sq ft of gross internal area
£125 to + £175

Cost / sq m

These costs were indicative for Central London 2012 and includes Class A fit out. (Class A buildings represent the highest quality buildings in their market. They are generally the best looking buildings with the best construction, and possess high quality building infrastructure. Class A buildings also are well-located, have good access, and are professionally managed. As a result of this, they attract the highest quality tenants and also command the highest rents. Building Owners and Managers Association (BOMA) states that Class A facilities have “high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.”)

Knowle: On the basis of these prices, the refurbishment costs for the 2,725 m² of modern offices at Knowle would be:
·         For a ‘medium refurbishment’- £2.2million-£3.7million
·         For a ‘major refurbishment ‘- £3.7million-£5.1million.

A model was developed based on a central London office block of 20,000m² over 10 floors. Using the terms above, in this model the maximum refurbishment includes:
Strip Out Works
Strip out of existing office space

Shell and Core Refurbishment
- No major structural alterations
- No work to existing sub-structure
- Replace existing AC system with upgraded cooling to perimeter
- New raised floor
- Level drylined ceilings
- New doors throughout
- New linings to cores and decoration
- New floor and ceiling finishes to Landlord areas
- Allowance for repairs only to facade
- New services throughout
Complete refurbishment of main entrance reception
Complete refurbishment of toilets
Replace existing passenger lifts
Replace existing fire fighting lifts

Category A fit out
Allowance for Category A fit out to all office areas; assumes all elements are new

External Works
General refurbishment of external works
Allowance for new Part L / Renewables Enhancements
Preliminaries and Contingencies

The total estimated cost of Major refurbishment to Category A using the above  specification was costed out at £1012 per m² gross internal floor area.

Knowle: On that basis the refurbishment costs for the 2,725 m² of modern offices at Knowle would be £2.8million (at Central London prices, 2012).

So, in summary, Class A refurbishment of the modern offices at Knowle might cost just £2.8million, perhaps £3.7million and, at an extreme, £5.1million with substantial structural changes.

The chamber plus associated offices are not included in this improvement. Clearly, there would be the need bring the chamber rooms into whatever new heating system were installed in the modern offices, and possibly to add air conditioning; also to improve insulation.

Overall, these figures still indicate that refurbishment costs could be met by sale of the remainder of the old Knowle for conversion to flats. Equally, office-refurbishment and a new building extension might be funded by sale of the entire old Knowle, probably for complete redevelopment as luxury flats.

It is not reasonable to dismiss the option of refurbishment and extension without subjecting that option to the level of analysis that has been applied to ‘moving and improving’. To the contrary, any open-minded approach would have started with the refurbishment option applied to only those parts of Knowle which EDDC would themselves occupy; and it would only have explored moving as an option if refurbishment were shown by a full and fair analysis to be impossible.

See also: Futures Forum: "A truly green alternative to EDDC's proposal"
Futures Forum: Knowle relocation: District Council challenged again
Futures Forum: Knowle relocation: new-build... pt 1

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