Protecting your bottom line: Safeguarding property investments with CBRE’s expert consultancy services

Safeguarding property investments with CBRE’s expert consultancy services

During the recent property market downturn, private property investors have been increasingly focused on protecting their bottom line. Throughout this challenging period, CBRE’s Consulting Services team has actively assisted investors with professional support to protect and enhance the value of their assets.

This includes providing make good assessments to mitigate financial loss at lease expiries, as well as enhancing tax efficiency with depreciation schedules for property acquisitions and capital expenditure projects.

Make Good Assessments

Traditionally, many private landlords in New Zealand adopt a DIY approach when dealing with vacating tenants, rather than engaging a professional team to prepare formal make good assessments at lease end.

Phil Overend, Director of CBRE Consulting Services, says this typically results in landlords overlooking tenant obligations to repair and reinstate the premises, and/or missing out on claiming financial sums to cover any make good requirements.

“Landlords are frequently absorbing unnecessary costs at lease expiry. This creates a ‘downward ratchet’ effect that erodes the value of their assets over time.”

In the past two years, as investors have increasingly focused on maximising returns from their assets, more property owners have realised the value of formal make good schedules to fully account for tenant obligations including reinstatement, repairs, and redecoration throughout the lease term. 

Many landlords are surprised at the comprehensiveness of a professionally-drafted make good assessment and the value of the associated financial claim.

“The cost of works the tenant is responsible for often far exceeds the cost of obtaining a professional make good schedule, usually by a factor in the tens and sometimes over a hundred times.”

Landlords who work with CBRE benefit from the team’s extensive international experience and professional qualifications, particularly in leading financial negotiations with tenants, Overend adds.

Another proactive measure landlords can take is commissioning a premises condition report at the start of the lease. This clarifies tenant obligations at lease expiry through documenting the property’s condition and ownership of fixtures and fittings when they move in.

CBRE’s chartered building surveyors prepare detailed premises condition reports which can again result in a lease expiry position which far outweighs the cost of preparing the initial report. Fees can also often be shared between landlord and tenant.

Tax Depreciation Schedules

Depreciation schedules are a key area where CBRE Consulting Services helps private commercial property investors maximise the tax efficiency of their holdings.

In the current climate of high interest rates, improving cash flow by maximising depreciation deductions is crucial.

As investors can no longer claim depreciation on building structure, it is now more important than ever to split out the fitout and other non-building assets such as hardstandings and infrastructure for depreciation purposes, says Overend.

“Our specialised quantity surveyors dive into the detail and identify every single depreciable asset associated wtih a property acquisition or capex project.”

During the downturn, CBRE has seen clients obtain purchase price allocations for acquisitions under $1m and construction cost allocations for projects under $500,000, both with a payback period on fees of three months or less.

“Our team includes experienced tax practitioners and experts with big four accounting firm experience. We’re well-equipped to help investors navigate the complexities of make good obligations and tax depreciation, at a time when paying close attention to these areas is vital in protecting investors’ financial positions.”