Leading UAE-based facilities management company Farnek Avireal has claimed that investors buying property in Dubai must think long-term when investing in property. Whether commercial or residential, prospective investors usually only look at the initial cost of property and how to finance it, but they should be more prudent. Many investors calculate their capital gains or return on investment, based on the initial price compared with the projected value at some point in the future without calculating the long term operational and maintenance costs.
Markus Oberlin, General Manager, Avireal Middle East LLC, said, “Few investors are aware that a property is not a single investment. There are operational costs to be considered. In facilities management terms there is the 25 - 75 per cent rule for complex buildings, such as hotels with swimming pools, spas, gymnasiums, retail outlets, restaurants, kitchens and multiple lifts. This means that over a period of 30 years the initial investment maybe as little as 25 per cent of the overall outlay, with building maintenance and energy costs accounting for the other 75 per cent.”
Developers should think in advance about facilities management and energy management, operational costs can be influenced through a good building design and a smart energy management concept.
“In many ways property investment can be compared to buying a car. Most people not only think about their initial investment, they think about fuel efficiency, the cost of replacement parts, warranty and maintenance costs thereafter. All of these issues can apply equally to property purchases. Buildings need to be maintained and certain components can influence the service costs for a property,” added Oberlin.
A further problem can appear for investors even when they do consider future service charges. To fully understand this, investors need to know what is included and what needs to be budgeted for separately. Moreover, it is difficult to just benchmark the price, AED 12 per square foot may seem reasonable but as the old adage goes, you get what you pay for and the price may not necessarily include all of the services one expects.
Another key issue that investors need to investigate is the sinking fund. A sinking fund is an amount of money to replace very expensive items some refer to this as capital expenses, such as lift motors, lift cables, chillers and so on. It is critical to know whether a proportion of the service charge contributes towards the sinking fund. If so, it is equally important to find out who is responsible for managing the fund and upon which criteria core components will be replaced and details of the investment plan in place to achieve this.
“Before investing, if your building is still not finished, take a look at similar projects that are complete. Ask other investors for their opinion compare apples with apples and make sure that you get what you pay for. Even if you buy off-plan, service charges can still be calculated, together with clearly defined inflation rate projections,” concluded Oberlin.
About Farnek Avireal
Farnek Avireal is one of the most comprehensive facilities management companies in the Middle East, with over 1,000 employees. They maintain over 500 buildings accommodating in excess of one million square metres. They clean more than 500,000 square metres of commercial and residential space, offer security protection to over 100 properties in Dubai, keep 100 installations fully operational and can reduce the energy costs by up to 20 per cent.
