In this more competitive and potentially lower growth environment, how will residential property investors and developers prosper? All of the usual rules about location, proper due diligence, efficient procurement and risk mitigation hold true, however one aspect of residential property that has often been neglected in previous decades, and which will become increasingly important in the coming decade is ‘good design’. In this Charter Insight, we discuss the value of good design and why it’s important to consider when making an investment and undertaking development in the residential sector.
Let’s start with the question, what is good design?
In general terms, good design provides for outcomes that function, that feel right, that are striking, that last the test of time and are cost-effective to use and maintain. In specific terms, good design includes high ceilings, flexible spaces, high-quality fixtures and fittings, good natural light access, cross-flow ventilation, double glazing, low-energy lighting, a high level of insulation, a high level of sound separation, non-toxic building materials and robust and low-maintenance surface materials. There are many more aspects to good design, and too many to list here, however in summary good design is as much about what you cannot see, as it is about what you can see. In saying this, what I also mean by good design, is that it must be accompanied with good construction in order to be effective.
So why are we not as critical about the design of our homes as we are about the design of our cars?
In cars we look for safety, fuel efficiency, reliability, acceleration, serviceability and looks – all measured through ratings and reviews that everyday consumers can access through reputable sources. Surely we should know at least as much, if not more, about the home in which we live? While we might not know as much about the design of our homes as our cars, occupiers are becoming more sophisticated in their understanding of design and investors and developers will therefore need to respond in order to prosper in this increasingly competitive residential sector.
So, what is the value of good design for investors?
In the next decade, investors will no longer be able to rely on riding the wave of strong returns that we saw in the residential sector in previous decades. Capital growth will still be available, however it will be harder to achieve. Along with selecting a location with good fundamentals, the design of residential property will be a key factor in determining return prospects for the following reasons.
And, what is the value of good design for developers?
In a market where investors are increasingly seeing the value in good design, and where owner-occupiers are likely to comprise a higher proportion of demand than they have previously, we think it will make sense for developers to supply well-designed product to the market for the following reasons.
“A green building is simply a better quality building. All too often we get hung up on what is green and what is sustainable, but actually, if you think of it as a better quality building, a more efficient building, a better day-lit building, better ventilated, a healthier, nicer place to live, to work or to play – it’s not difficult to make the link between that and a building being worth more to people.”
Scott Keck is Chairman of Charter Keck Cramer, a leading Australian independent, strategic property consulting firm. Scott has 44 years property valuation experience within the Melbourne market, having begun with the firm in 1968, becoming a Director in 1978 and Managing Director in 1984 and Chairman in 2010. Charter Keck Cramer employs over 200 people within its nine strategic business units. All professionals have backgrounds in property related disciplines including; Valuations, Corporate Real Estate, Development, Economics and Research.