Build value with FM Validation Model

Strategic cost modelling has the potential to save developers hundreds of millions of dollars over the life cycle of their assets. Martin Gregory, International Director of Facilities Management Consulting at Drees & Sommer, explains

- Martin Gregory

The master developments, business parks and residential communities we see around us have spent years in the planning, design and construction phases. Rightly so; they are expected to have decades of use in them. Yet, time and again, we see critical costs being ignored, financial risk assessments that are sorely lacking, and budgets that simply don’t add up. Here, we’ll assess why this happens, the potential pitfalls, and most importantly, suggest how proper stress tests via bespoke validation models can help create truly sustainable developments – as relevant in 50 years’ time as they are today.

Pre-concept design

Briefly speaking, all projects begin with a feasibility process, during which developers analyze the best use of their land and the market fundamentals and opportunities for this use. This leads to a pre-concept design that meets a capital budget, or CAPEX.

However, too often, there is a fundamental gap between a developer’s analysis of the capital expenditure required to build their project, and the operational costs of maintaining this asset – the OPEX. In fact, the vast majority of developers don’t define the latter at all, or they base this cost on misleading benchmarks. For example, it’s not uncommon for developers of luxury residential projects to benchmark their service charge on an affordable housing development or compare a high-density project to one that is less efficient.