The Leading News & Information Service For The Facilities, Workplace & Built Environment Community

The Implications of Lockdown on Building Maintenance

The Implications of Lockdown on Building Maintenance
09 July 2021 | Updated 13 July 2021
 

With lockdown disruption affecting the way property owners maintain unoccupied properties, what long term implications on building maintenance should property owners be aware of regarding insurance?

In collaboration with Ben Warman at Lockton, Robert Burke, Head of Project and Building Consultancy at Property Consultants Cluttons, discusses the challenges and opportunities for property owners post-lockdown.

Burke is a chartered surveyor and a Fellow of the Royal Institution of Chartered Surveyors (RICS), specialising in building surveying particularly in technical due diligence, dilapidations/lease advice and development monitoring.

 

"Prioritise urgent and health and safety matters first. You will then need to work with your surveyor to ensure you have up to date prices, and a plan for the remainder of the work. Surveyors will be able to help with procurement and to advise over supply chain and any delivery issues."

 

The Implications of Lockdown on Building Maintenance

 

Insurers, in some instances, relaxed inspection requirements for unoccupied buildings for a limited period during lockdowns and it was up to owners and occupiers to take appropriate preventative measures. The priority was on protecting businesses and rental income with differing push and pull factors from landlords and tenants. A number of the day to day management tasks were more difficult; with travel bans affecting regular inspections. Where practicable, many took steps to maintain and test fire systems - particularly in residential buildings. Commercial property owners did their best to secure perimeters and ensure adequate building security.

With pressure on revenue, preventatives such as installing or extending CCTV, reconfiguring alarm systems were even less affordable. In April 2020, a month into the UK’s first national lockdown, QuestGates reported a 50 per cent drop in property claims. May 2020 saw fewer still. Evidence suggests that this was less to do with site visits and enhanced security and more to do simply with the fact that businesses were not present, and properties were vacant. By June 2020, as lockdown one ended, it was back to business as usual on the number of claims.

One of the challenges faced by building owners and managers was a widespread lack of availability of materials, and initial uncertainty over whether construction sites could remain open. This often led to significant delays to scheduled site visits or for remedial work to be undertaken. Most contractors continued to respond to emergencies, but costs increased. Social distancing restricted workers' access to buildings, adding to costs and lengthening timescales.

A surge in homeowners’ enthusiasm for domestic renovation projects contributed to shortages of labour and materials. Price spikes were often exacerbated by pandemic-induced disruptions to global supply chains. This again led to constricted supplies of construction materials and parts.

The potential consequences of such challenges are obvious. If a damaged property is not promptly repaired, costs can quickly escalate. However, a recent QuestGates analysis of claims found little trace of any noticeable increase in costs since the pandemic began and over the course of an eight-month period during the COVID-19 crisis, Sedgwick detected only an average 0.7 per cent increase in costs for commercial property claims.

As the UK moves tentatively towards an emerging new normal, the fallout from this unprecedented era has both current and longer-term implications for the real estate sector. More settled claims trends are now beginning to emerge in the partially post-pandemic phase we’ve been in since March this year.

 

Looking to the Future

 

Asset values have clearly been impacted - not least by what may turn out to be lasting changes to how and where people choose to live and work. Meanwhile, insurers are likely to impose new policy coverage restrictions, sometimes increased policy excesses, or in the worst cases, withdraw coverage altogether for buildings left unoccupied over extended periods. Until the true new normal settles in, the key will be ensuring that affected properties are well maintained, weather-proofed and secure against unauthorised entry.

Insurance premiums are likely to increase, to cover the costs of increased claims, and materials shortages, that have been well published, are set to continue. There is ensuing chaos in the shipping industry as well with suppliers struggling to secure passage and even get products to ports around the world. Restrictions in ports have also led to delays at the other end. This has pushed prices up and caused problems with procurement and supplies – leading to delays on construction projects. The easing of restrictions is not expected to have an immediate impact on the availability of materials or on the resulting increase in pricing.

Landlords might well find they now have control of vacant buildings with a backlog of maintenance issues and damage together with no tenant to pay rent and a depleted service charge. Tenants may feel that they are in a good position to do deals with landlords, although ignoring such works will store problems for the future.

In addition, there has for some time been a shortage of home-grown construction skills. Such shortfalls have been filled from Europe and elsewhere. Europeans particularly started to return to their countries before Brexit and this level of return increased during the pandemic. Since then travel restrictions and fewer, more expensive, flights have made it difficult for them to return to the UK. This skills shortage has delayed projects and fundamentally pushed up costs, with bricklayers and plasterers anecdotally charging three times what they used to

 

What To Do?

 

If you have got a schedule of works required in the form of a priced specification, a Planned Preventative Maintenance schedule (PPM) or just some lines on a service charge budget, now is the time to review these. Prioritise urgent and health and safety matters first. You will then need to work with your surveyor to ensure you have up to date prices, and a plan for the remainder of the work. Surveyors will be able to help with procurement and to advise over supply chain and any delivery issues.

If you do not have a PPM now is the time to get yourself one to map out what is needed against funds available.

You should also check your insurance policy and work with your property and insurance advisers to assess whether any claims may have merit.

It is also worth considering tax breaks and the affordability of projects. Capital Allowances offer a unique form of Value Engineering – if projects utilise capital allowance savings to realise an additional 5, 10 or 15 per cent of value, scheme opportunities are substantially increased. Capital allowances remain of value if a project has begun or is even complete, entitlement will not generally diminish. Proactive planning, however, will exploit all optimal project opportunities and maximise savings.

More recently the UK’s economic recovery was placed at the heart of the Budget earlier this year, unlocking significant cash reserves through increased Capital Allowances, and with an expected investment into the property sector of £20-30 billion over the next few years, there is a great deal of value for clients. Companies will be able to claim these quite remarkable levels of capital allowances in the form of 130 per cent Super Deductions for General Plant, along with new First Year Allowances which will be available for all Integral Feature assets at 50 per cent in the first year. This essentially means clients can realise savings over and above full cost deductions rather than just accelerating the mitigation of a tax liability. Furthermore, the extended Annual Investment Allowances tax relief of £1 million per annum currently remains in place.

This should encourage companies to view future or new projects more immediately, stimulating clients to bring projects forward, no doubt providing a great catalyst to increase construction expenditure. Certainly, both increased cashflow and permanent savings will aid business confidence, which is very much needed.

Finally, with a backlog of work and some favourable capital allowances as well as a landscape of vacant or underutilised building – now is the time to consider works and projects. These will need careful management and planning to prioritise and work through supply issues.

Now, more than ever, is a time for landlords and tenants to work together.

Picture: a photograph of Robert Burke

Article written by Robert Burke | Published 09 July 2021

Share



Related Articles

Lloyds of London Considers HQ Move From Iconic Building

Lloyds, the world’s largest insurance market, is considering moving from its 1 Lime Street headquarters, a site it has occupied since 1986. A spokesman for...

 Read Full Article
Is Your Vacant Property Insured?

As insurers take different approaches to their treatment of vacant property during COVID-19, property owners are being encouraged to check their policy...

 Read Full Article
Great Portland Estates Acquires Two Central London Offices

Great Portland Estates has bought two Central London office buildings for £53 million. Bramah House, 65/71 Bermondsey Street, SE1 and  141 Wardour Street,...

 Read Full Article
SFG20 Launches Online Tool to Help FMs Estimate Maintenance Costs

A digital tool to help facilities managers accurately price the specific maintenance requirements of any building has been launched by SFG20. The SFG20 Resource...

 Read Full Article
Demand for Digital Infrastructure Drives Data Centre Uptake

A research paper from JLL shows that the mass adoption of cloud computing and AI is driving growth in the data centre industry. According to JLL’s Global Data...

 Read Full Article
Commercial Property Sales Data Shows 'It's a Buyer's Market'

A survey of UK commercial estate agents shows that commercial property sales price per square foot are set to fall by 1.6 per cent, as the market shows signs of...

 Read Full Article
Transport for London Signs Deal With Helical for Over-Station Offices

Transport for London is to partner with Helical to create a new sustainable commercial office portfolio across central London. TTL Properties Ltd, the property arm of...

 Read Full Article
2023 – A Year for Human-Centric Maintenance?

Felipe Ávila da Costa, Co-Founder & CEO at Infraspeak, shares his reflections on the past year and his predictions for human-centric maintenance in...

 Read Full Article
Spotlight Interview Part One – James Massey | MRI Software

MRI Software is a global name in real estate technology. We spoke to James Massey, Managing Director of Facilities Management for MRI Software, about his career so far,...

 Read Full Article
Nirvana Group Holdings Acquires Nirvana Maintenance and Urban Maintenance Group

Nirvana Group Holdings (NGH) has acquired Nirvana Maintenance and Urban Maintenance Group, to continue its expansion into the North West. Nirvana Maintenance provides...

 Read Full Article