Over the years, the demand for childcare centres has skyrocketed as a profitable investment and robust asset class. Childcare centres have been popping up all over our cities and will continue to be built well into the future. Developers are delivering new childcare centres along with refurbishing existing childcare centres and repurposing other asset classes to childcare.
In this article development manager Dan Everett of EVERETT Property Development Management talks with building services engineer Toby Murdoch from Ashburner Francis Consulting Engineers regarding the steps that need to be taken when developing a childcare centre.
Toby Murdoch has often seen childcare centres developed as cheaply as possible. Often not designed with input from services consultants. As a result, the asset owners can end up with a building that is inefficient with poor-quality systems and equipment. This often equates to higher running costs and plant and equipment replacement much sooner than predictable.
The developers that are providing sub-standard building services in buildings may save money on the capital investment of the building, however all this does is defer the cost to the asset owner and operator, resulting in unpredictable operation and maintenance costs. Instead of undertaking replacement of major plant & equipment at say, year 20 or 25, Toby is witnessing buildings undergoing replacement at year 10 or year 15.
Asset owners and operators rarely forecast early major plant replacement costs into their budget, so it comes straight off the profit and often causes commercial pressures which take years for businesses to recover, and more often than not, causes them to fail. If developers and tenants spent time upfront considering building services they can reduce their exposure to rising utility costs, reduce the energy and maintenance costs, and obtain long life equipment. This allows them to focus more on their core business (everything “just works”) and it means they are less likely to suffer major unexpected costs in 5-15 year’s time from premature failure of equipment.
This is what Ashburner Francis call sensible engineering, but the real clincher is that we can also take this a step further by being able to bring together system providers who offer these systems “as a service”. What this basically means is that the client doesn’t pay for systems upfront, they sign on to a long-term agreement so the provider supplies, installs, operates and maintains the plant (say, air conditioning & solar photovoltaic), and the client pays for it over time as a service. So, the client pays an agreed amount per month, and in return they get air conditioning as a service which includes all of the operating costs. This is instead of traditional methods where they buy the air conditioner, then they pay for the energy it uses, then they also pay to have it repaired and maintained.
The result is that it takes the cost of the plant out of the construction budget and puts it into the operational budget as a fixed, known cost, which allows developers to build the facility with less capital, and gives asset owners predictability of costs and good quality plant and equipment.
Childcare is a lot like aged care whereby their income is largely fixed per government funded place, so they need to have predictable overheads because unlike a lot of other businesses they can’t just increase their prices if their overheads increase.
For new developments, define the development brief and asset operations brief before signing pre-lease commitments and starting design. It sounds easy right… And It can be, by bringing the right people to the table early in the equation.
Sit down with your development manager and nut out the development brief and asset operations brief before signing pre-lease commitments and starting design. Review the procurement strategies and briefs with the Asset owner, Lessor / Body Corporate manager, Strata manager / Developer / Builder / Design consultants / Services Design consultant’s / Leasing agent / Lessees, Tenants / Lawyer / Accountant and Financier.
For existing assets, define the assets operational situation before signing lease agreements.
It sounds easy right… Much like above, it can be by bringing the right people to the table early in the equation.
Review the assets operational situation with the Asset owner, Lessor / Body Corporate manager, Strata manager / Services Design consultants / Technical due-diligence consultant’s / Leasing agent / Lessees, Tenants / Lawyer / Accountant and Financier.
When a tenant has done sufficient due-diligence, they would be well placed to assign costs to differing operational situations allowing them to negotiate on lease rates.
- Developers and Asset owners may find they can achieve higher lease yields due to sensible engineering
- Tenants may find they can pay higher lease rates due to well considered operation and maintenance solutions.
Take away for Consultants
Consultants don’t assume clients are on top of the latest technologies and procurement options for building services. Our clients need educating to keep up to speed and this is where the “good” consultants in the industry will step in and provide the advice that developers, asset owners and operators need to ensure they can make informed decisions about base building and fit out services before any agreements are signed.
Take away for Developers / Asset Owners / Tenants
- Consider sensible engineering.
- Consider system providers.
- Define the development brief and asset operations brief before signing pre-lease commitments and starting design.
- Define the assets operational situation before signing lease agreements.