Refurbishment is undertaken to combat depreciation and there are various reasons for refurbishment. The various reasons for this are; increased space and standards, more complexity equipment which require different accommodation, compliance with statutory requirements, upgrading of safety requirements, improvement of acoustic or thermal performance and more commercial competition in the market place.
The extent of refurbishments can take various forms such as superficial renovation being minor decoration, secondly minor rewiring, new plumbing or re-painting and thirdly major renovation being structural changes, new floors or relocation of ablution facilities to mention a few.
There are numerous advantages of refurbishment to various stakeholders in the property market. The municipalities benefit in terms of maintaining a certain standard for the surrounding area which results in long term growth and sustainability of the municipal infrastructure. The lessee or potential lessee benefits in terms of well-maintained facilities in terms of its brand or status and the lessor or owner of the property benefits the most in terms of cost savings relative to a new building and retained or higher potential rental income from tenants.
In recent years, there has been a large increase in the refurbishment of old and vacant properties in preference to constructing new buildings in South Africa. This is evident across all the different property sectors namely residential, commercial, retail and industrial properties. Refurbishment and conversion of buildings in South African cities is classified in general as urban regeneration. Urban regeneration is an international phenomenon and is caused by a range of factors including urbanization, migration trends, globalization and poverty.
The potential for refurbishment and conversion is evident in the South African Property market. With escalating construction costs for new builds and uncertain economic times investors, developers and institutions will continue to pursue properties with refurbishment or conversion potential. The residential market is the largest and remains affordable for smaller investors, developers and entrepreneurs to access the market. The last few years has seen more participants enter the market and it is expected to continue to be an attraction in the foreseeable future. Participants do not require large capital amounts as compared to the commercial market and risks are low in comparison to commercial properties.
There has been tremendous growth in the South African refurbishment and conversion sector of the property environment over the last five to ten years. This trend is expected to continue in the years to come with various large projects already in the pipeline and many more projects being planned.
