Upload
shahrilcang
View
684
Download
0
Tags:
Embed Size (px)
DESCRIPTION
Citation preview
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 1
Managing Office Property Lecture 4
Department of Real Estate Management Faculty of Technology Management and Business
(Semester 1 2012/2013)
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 2
Introduction
• An office building can be defined as a property that provides facilities (space) to a tenant engaged in services rather than a location where goods are sold (shopping centre) or manufactured (industrial building)
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 3
Supply and Demand
• Developers build office space based on two types of demand– Space-created demand– Money created demand
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 4
GRADE LOCATION RENTAL RATE TENANTS
A Best Highest Most Prestigious
B Second Best
Slightly less than A Good, Solid
C Older area Below A & B Lower income
D Near CBD Lowest Not usually maintained
• Decarlo (1997) categorised office desirability into four grades:
Location Desirability
Desirability
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 5
Desirability
• Why are some office buildings at full occupancy with high rental rates while others are half empty at bargain-basement rents?– The answer is ‘desirability’
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 6
Desirability
• The grades are achieved by ranking 12 criteria:
– Location– Neighbourhood– Transportation– Prestige of
building– Appearance– Lobby
– Elevators– Corridors– Office interiors– Management– Tenant mix– Tenant service
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 7
Market analysis
• Regional analysis– Reflect availability or scarcity
• Neighbourhood analysis– Prestige of the local area, transportation,
parking and proximity to business and services
• Absorption rate– The no of sq feet that have been historically
been leased in the market area.
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 8
Market analysis
.
• Site selection–4 key factors influencing the
selection of office facilities (Kyle, 2000)• Cost• Accessibility• Environment• Labour market
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 9
Property Analysis
• Measuring the building– Gross area of entire building
• The total sum of the areas of each floor including lobbies and corridors within the outside faces of the exterior walls
– Gross rentable area• All areas within the outside walls, less pipe shafts, vertical
ducts, elevator shafts, balconies and stairs
– Net rentable area• Total sum of gross rentable area – (public corridors,
washrooms, janitorial and electrical closets, air-conditioning rooms and other rooms or areas not available to the tenant and the tenant’s employees
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 10
Property analysis
• The property manager should be sure that figures are accurate and truthful to avoid confusion and lawsuit.
• In describing the space, the lease document should contain language such as ‘suite 300’, which approximately 3,000 square feet’.
• As a rule of thumb, the higher the loss or ‘load factor’ (unusable space), the lower the rent, because the tenant receives less usable space.
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 11
Property analysis
– For example: if the net rentable area is 80,000 sq ft, but only 70,000 sq.ft are usable due to corridors, the load factor is:• 10,000/80,000 = 12%
– So, gross area of entire building – (Shafts, ducts, balconies and stairs) = rentable area (tenant pays rent on) – (public corridors, restrooms, mechanical rooms) = USABLE AREA (tenant occupies)
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 12
Property analysis
• Usable area– Any area in a given floor that could be used
by the tenant.– This area includes a point from the perimeter
glass line to demising walls– It also includes column areas within such a
space
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 13
Setting the rent schedule
• Factors to consider:– 12 criteria for ranking the building– Additional amenities– General economic conditions– Owner’s break-even point
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 14
Setting the rent schedule
• Example from the market survey
– If the rent is RM4,000 permonth on 2,500 sq. ft of space, • the quoted rate = RM1.60 psf permonth or
RM19.20 psf perannum.
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 15
Setting the rent schedule
• Example from Break-even Analysis– A break even analysis determines the min
rent needed to pay all of the building’s expenses and costs, as well as the owner’s expected return.
– the formula: • B/E rent = (expenses + mortgage + return)
rentable area of building in sq.ft.
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 16
Setting the rent schedule
• For example:– Rentable space = 50,000 sf– Expenses = RM291,258– Owner’s equity = RM1,000,000– Owner’s rate of return = 10% = RM100,000– Mortgage payment = RM568,742– Mortgage = RM4,500,000
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 17
Setting the rent schedule
• Therefore:– B/E rent = (RM291,258 + RM568,742 + RM100,000
50,000 sqft = RM960,000 50,000 sq.ft
= RM19.20 sq.ft per annum
• so the min rent charged is RM19.20 sq.ft per annum or RM 1.60 sq.ft permonth to cover all of the building’s expenses, costs and the owners’ return
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 18
Tenant selection
• Major tenants• Small tenants• Attracting tenants
– Newspaper adverisments• Direct mail• Publicity• Signage• Brochures• Miscellaneous media
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 19
Leasing consideration
• On-site vs off-site• Property management vs leasing agents• Small vs large leasing firms
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 20
Leasing techniques
• Cold-calling• Space planner• Existing tenants• High status tenants• Comparison of buildings
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 21
Maintenance
• Smart (intelligent building)– 5 classifications of smart buildings
• Level zero – has no intelligent amenities and does not qualify.
• Level one – provides infrastructure core• Level two – provides level one capabilities + conference
space, photocopying and business centre• level three – provides level two capabilities +
telecommunication services utilizing building cabling system• Level four – provides level three capabilities + sophisticated
office automation and ICT.
UNIVERSITI TUN HUSSEIN ONN MALAYSIA09/04/2023 22
References
• Decarlo (1997), Property Management, Thomson.
• Kyle, R, (2000), Property Management, 6th Edition, Dearborn.