Shabby, under-utilised commercial properties that have seen better days are a common sight. Yet such buildings often have potential lurking within them. Before consigning a rundown warehouse or office block to the “too hard” basket – and simply knocking it down or flogging it off – it could well pay for the owner to investigate retrofitting the building.

Retrofitting of older properties will extend their lifespan, ensure they are fit for purpose in terms of both compliance and emerging technologies, increase their value and also boost their attractiveness to tenants.

The type of retrofitting which hogs the headlines is the adaptive re-use of tired, or even derelict, heritage buildings. There are some spectacular examples of this around.

One of these is the former Dominion Post headquarters which, after a $10 million redevelopment, is now Transpower’s new home. The transformation of the previously vacant and obsolete buildings scooped the supreme award at the NZ Property Council Awards this year.

McKee Fehl Constructors managing director Maurice Clark, who is wellknown for his restoration of a string of high-profile heritage buildings, was behind the Transpower redevelopment. He says that retrofitting involves gutting a building back to the bones of the structure, then strengthening and re-fitting it out with new services and architectural finishes.

“The major benefits of retrofitting a building – as opposed to knocking down and rebuilding – are the green and heritage factors. But retrofitting can mean re-positioning the building in the market for re-leasing. With a retrofit, property owners should be aiming to achieve a higher rent, but sometimes it’s about getting a dog re-leased.”

However, retrofitting is not necessarily cheaper than building anew, Clark says. For example, it’s not cost-effective for non-heritage, earthquake-prone buildings which need lots of strengthening. “Often retrofitting a heritage building can have resource consent issues if one wants to maximise commercial potential. Also, tying up a firm fixed price construction contract can be almost impossible.”

Seismic Considerations

The transformation of heritage properties is one thing but, in New Zealand, retrofitting is most often required for earthquake prone buildings which have an NBS rating of less than 34%.

That’s because some older buildings were built to standards with lower seismic bracing requirements than the current standards, Envivo principal structural engineer Wilhelm Wolfaardt says. In this context, retrofitting is the addition of bracing or diaphragms to improve the connection of structural elements to increase a building’s NBS rating.

Wolfaardt says that once a building has been tagged as earthquake prone, tenants tend to vacate and landlords can’t rent the building out. “EQP buildings also have less market value and sell for significantly less. Yet heritage buildings cannot be demolished to make place for new buildings, so they can become a financial liability.”

When retrofitting is the best option, industry recommendations are to upgrade an existing building to an NBS rating of at least 67%, Wolfaardt says. “But, with a change in use, many local authorities will insist on an upgrade to 100% NBS. Also, a building that is just above 34% NBS will not have the ability to maximise rental return.”

While there are minimum legal requirements for bringing buildings up to standard, things do vary depending on the seismic region, the local authority and the heritage requirements of the building. Most retrofitting for seismic compliance will require a building consent and accessibility and fire reports.

Wolfaardt says there can be challenges around the presence of asbestos and a lack of relevant information, like building plans.

This means a contamination investigation and extensive examination of the building’s foundations and materials is necessary before any upgrading. “Such work allows an engineer to calculate the capacities of the various parts of the structure. It also significantly reduces time constraints in the retrofitting of existing structures.”

Going Green

In the aftermath of the Christchurch and Kaikoura earthquakes, retrofitting has attracted greater visibility – and urgency. But going forward it is the increasing government requirements on environmental issues that is likely to further push the retrofitting trend.

That’s because New Zealand has signed up to international agreements on carbon emission reduction. Commercial properties are responsible for a sizeable amount of carbon emissions and that means a lot of existing stock will need to be upgraded to a more energy efficient standard.

NZ Green Building Council director of market transformation Sam Archer says commercial investors need to know this is a movement which won’t go away. “They need to be de-risking their buildings for the future, especially as growing numbers of tenants want to have well-run buildings that are low-emission and environmentally friendly.”

It is only possible to improve the energy efficiency of a building when you know where and how energy is being wasted. That means comprehensive benchmarking of a building’s heating, lighting, ventilation and water systems is necessary.

Archer says once you have established the areas of inefficiency you can think about what to do to address the issue. “There are some easy things that can be done at a cost-effective rate. For example, installing more efficient retro-set lighting has good pay offs. So does replacing a 20 year old air conditioning system with a new one, and putting timers and sensors on different building systems.”

The benefits of going green are significant for commercial landlords, Archer says. “Not only is it socially responsible, but there is good evidence that energy efficient buildings attract tenants on better terms. And there are blue-chip tenants who are willing to sign on for longer term leases and higher rents too.”