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Old buildings demolished for new? Question of sustainability.

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Old buildings demolished for new? Question of sustainability.

Many friends, especially the ones who grew up in the Klang Valley posted the sad news about Plaza OUG being demolished for a new highrise building. Some commented that it should not be demolished because the new highrise building is not needed. Some questioned if highrise building will make the traffic jam even worse than today. Some say that Plaza OUG should continue to operate. Actually it is a question of sustainability. 4 questions to ask about sustainability and this is not about Plaza OUG but for all older buildings which is in need of a full makeover.

#1 – Is the building still popular among visitors?

We could just take a look at the types of shops there and whether they are doing the usual high volume retail or they are there because the owner of the shops felt that they could pass their time and still gain some money every month. There’s a similar building in Ipoh too called Yik Foong Complex. It’s also where I used to roam with my good friends. It’s in a sorry state and there are very few visitors even on weekends. The shops there may be there because they have been there for a very long time and if the owner is already at the retirement stage, there’s no need to do too much already.

#2 – Can the building be popular again? Placemaking possibility?

If a mall concept is no longer applicable, could it be turned into something else? Perhaps the building management could get a big anchor tenant, say Decathlon and the building will now get a newlease of life? Then again, the building must also pass all the stringent requirements of the anchor tenant and the building management may not have the financial resources to make it work. By the way, anchor tenant could be anything yeah.Can even be a hotel operator perhaps? Basic idea is, does this building have what it takes to be popular again?

#3 – Is the owner looking to maximise the potential for the building / land which it sits on?

Many times, some buildings which are old but still in good condition may also be demolished for a new development. The reason is a simple one; profitability. The building owner could collect rental per month from all the shops and continue to be happy or the building owner could sell the land to a developer who could build something with a GDV of a few hundred millions and share the profits with the building owner. In this case, what has happened is that the building owner may have all the rental they should be getting in say 10 years in 3 years… Or more. An old building’s slow yield cannot beat the potential quick profits from a development worth a few hundred millions or even a billion ringgit.

#4 – Is it sustainable, if the owner wants to retain it?

The issue with old buildings would be the wear and tear and when there’s wear and tear, maintenance cost would rise. Could the owner actually maintain the building in tip top condition with the rental / profits they were getting? If the maintenance cost could barely be covered by all the money the owner gets, then it’s not sustainable. The owner may then start to cut corners on the maintenance and because of this, the current tenants may move to a new place and this will make the situation worse as the owner would now have lower rental income. The vicious cycle continues until the owner decides to do something else with the building.

Conclusion

As they say, memory lasts forever. Well, buildings do not. They will only last as long as it is still sustainable. Else, it would have to be replaced with a more sustainable development. Would the new development built on top really be more successful than the development it replaces? That is another question altogether. It would be something which the new development would have to do careful analysis prior to executing their development plans. Again, the question will be sustainability.

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Header Image by Nicole Köhler from Pixabay 

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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