Spot The Best Property Investments With Technical Due Diligence
If you’ve got a hand in the commercial property market, now must feel like a frenetic mix of instability mixing with promising opportunity. A strange cocktail of risk and reward.
On balance, there seem to be a number of reasons:
- Property firms are keeping a close eye on the market and trying to seize a promising opportunity.
- Headlines tell us on a daily basis that prices (much like the proverbial sky) are falling.
- Owners are hasty to offload at a discount to cover their arrears.
- Investors both nationally and across the seas are always hungry to secure a bargain before the trend moves on.
And of course, this trend seems half-stirred into a frenzy by COVID-19. The pandemic market left us with the expectation that the sector will see a flux of assets hit the market and drive prices down further. Just as would-be homebuyers are hoping.
Overall, we are definitely seeing a noticeable uptick in investor demand for quality properties in strategic development, hub or CBD locations. Particularly in the industrial and retail space. A trend we expect will continue as the initial impact of COVID wanes.
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Emerging property trends
Sentiment from within the industry agrees that ‘the prevailing slower markets environment will give investors who have a smart mind impetus to buy the properties that are able to compete strongly in the future.’
In the same period, property owners have used this time to undertake medium to long-term capital upgrade strategies to ensure the longevity and value of their assets in a post-COVID environment.
The prevailing attitude appears to suggest that these properties present strong investment potential. However, the viability (or liability) of any individual property is not as clear.
Herein lies the problem. One which I’d like you to try and answer for a moment: Which opportunities are the ones worth taking, and which have the investment potential of warm porridge?
Anyone with a chance is looking to buy into commercial property fast before the looming upswing seeks to restore balance. The only problem is, moving too fast is likely to cause a lot of pain down the line.
How do you avoid consequences, liabilities or shortfalls in the longer term?
Technical due diligence
The proverbial Berocca to avoid what Maddocks Law firm recently called the post-acquisition ‘hangover’ is technical due diligence. Technical Due Diligence is classified as ‘an investigative survey performed by prospective investors during the pre-investment stage of a product or property… That aims to provide insight into the costs and risks involved in the acquisition or sales transaction.’
Broadly speaking, due diligence takes in a wealth of considerations. It weighs up legal, environmental, risk, technical and financial factors to give an overall view of the viability of the purchase.
Hendry understands the need for accurate and timely technical reports on the condition, quality and compliance of buildings and their underlying elements. In fact, it is an essential component in making an informed acquisition, disposal or property management decision.
Being experts in technical matters across the whole-of-life of assets uniquely positions us to deliver technical due diligence audits. Our audits deliver definitive data on asset health, compliance and fitness for purpose. With this audit, investors/owners understand if what they are getting is value for money or if the risks outweigh the benefit.
Choosing a practitioner: Doing your (technical) due diligence
It is crucial that property owners and developers partner with a pragmatic and commercially orientated property expert when embarking on a physical due-diligence process.
‘In order for investors to navigate through the Australian market that is experiencing a lot of varied conditions, careful consideration and independent professional advice will guarantee you a softer landing in the property market.’
Our organisation and its practitioners have an established reputation and proven track record. We support property owners throughout the lifecycle of an asset. From concept design approval to acquisition, management and disposal of assets.
Knowledge and understanding of assets throughout their lifecycle is crucial to providing informed property risk analysis and investment decisions. For Hendry, we’re proud of our zero-claim history, spanning over 38 years as a provider of technical due diligence and building compliance services.
Staying apart, together
Finally, you should consider that space usage is going to change, too. Compliance is also taking a new shape. Post-COVID, we are seeing a spotlight on health, safety and environmentally sound buildings.
Maddocks Law advises that ‘you should also determine if the current premises is appropriate for social distancing and new working requirements. What has worked in the past may not be appropriate going forward.’
Deloitte, in a recent study, also pointed out that ‘during the due diligence process, it will be necessary to consider aspects of the “new normal”, which means differentiating which factors do not represent perpetuity from those “came to stay” and will permanently impact the company.’
A good practitioner would ensure that these factors are taken into consideration. Particularly when providing their assessment and recommendations for a commercially viable acquisition and long-term operation.
Get technical due diligence advice you can trust
Through boom and bust, nothing is a better guarantee than doing your homework. As a national consultancy, Hendry has the capability and resources required to service your due diligence needs across Australia. For all your NCC Compliance, property risk, accessibility and inclusion needs. As well as your strategic asset management projects.