GLOBAL WAVE: The global trend in centralisation is sprouting a sub-sector of the building industry namely refurbishment
There is a refurbishment wave sweeping across the globe,” declares property investment consultant Gavin Tee as early as last year. “During my many travels to countries such as India, Myanmar, Singapore and parts of Europe, I have seen a trend of old buildings in central locations being refurbished instead of demolished. It’s a trend that’s happening in Malaysia too,” says Tee.
Elaborating further, the consultant narrows down the reasons to two phenomena:
a.Globalisation – the wave of globalisation has brought about a huge amount of international travel with business and leisure travellers visiting cities resulting in city centres seeing a spike in foreign arrivals. Consequently, city centres are regaining its central position in the arts and cultural scene with tourists converging onto such areas which are teeming with cultural and historical significance. Cities such as Bangkok, Singapore and even Kuala Lumpur are well-known and easy to reach now with low cost airlines making these cities a transportation hub. Most international travellers are familiar with them. It also creates a lot of business opportunities in these cities.
“Globalisation and tourism go handin-hand. The foreigners would like to visit places that have strong local flavours.
They don’t want to see modern buildings. That’s why there is a huge demand for residential buildings or hotels to retain the old character. After refurbishment, the value shoots up,” Tee explains.
b.Urbanisation - Due to the focus back on city centres or inner cities which in many cases have limited space for further development, the only options are to refurbish or redevelop. Many cities worldwide such as Singapore and Beijing are now experiencing urban renewal as old houses which are not safe or clean to stay, are torn down to make way for the new.
Old buildings are normally situated in the best or prime locations. From New York to London, from Paris to Bombay, from Beijing to Bangkok, all the prime properties are located in prime locations, which are usually in the core city centre.
Refurbishment is particularly relevant for older buildings with historical significance, Tee continues. “For example, in Germany, refurbishment of buildings with listed status is big with the government supporting it by giving incentives. In Mumbai, many historical buildings are refurbished to house hotels and other businesses.”
Like antique, old properties with history have more value. A lot of investors and developers attach great value to such properties, Tee reveals.
He adds that human beings like to protect historical or cultural artefacts.
“They just love to protect heritage or culture. Urbanisation and modernisation have picked up too fast in the 21st century, leading to China, India, and even to some extent Malaysia experiencing ‘hyper-urbanisation’. An example is when many shopping malls start sprouting everywhere. That has led to people wanting to preserve the past and their heritage,” he shares.
In Malaysia, refurbishment works have increased in Penang and Melaka especially after they were declared UNESCO heritage sites while the Klang Valley has seen a steady increase. Section 14 in Petaling Jaya for example, has seen a lot of redevelopment taking place in the last few years while in Kuala Lumpur, the old quarters such as Jalan Petaling, Jalan Tuanku Abdul Rahman, Medan Pasar, Pudu area, Jalan Imbi and Jalan Raja Laut are popular with refurbishment work.
To buy or not old properties? Given the appeal of old properties, shouldn’t investors start accumulating them? “Yes, definitely. Old buildings are recession proof during downturns.
The heritage building or building with historical character will always maintain its value throughout the times. Old buildings are cheaper than new ones now, so I advise looking into properties with refurbishment potential especially those in the city centre that’s located at or near tourist spots. But, you need to do your homework on the refurbishment costs, including familiarising yourself with the local authorities’ regulations as there might be some restrictions,” the Founder and President of SwhengTee real estate investment club says.
“I advise people to buy old landed bungalows in Penang, old shoplots in Melaka and certain parts in KL, for example Jalan Raja Laut, Pudu, Jalan Alor, and all areas near Bukit Bintang.” Of note are old development areas which have limitation for further development such as Jalan Alor, which are surrounded by modern buildings. All the shoplots there have individual titles.
Shoplots in Changkat Bukit Bintang (near Jalan Alor) are hard to value as they have unlimited potential, shares the investment consultant.
“Bungalows in Georgetown may be priced RM5 million today. It can even go up to RM10 million within a few years. This trend has happened in many places in the world especially third world countries like Cambodia, Laos and Vietnam,” Tee says.
The overseas experience: In the UK, the refurbishment market has been growing steadily since the 1970s (Kincaid, 2002), says Associate Professor Dr. Syahrul Nizam Kamaruzzaman, Deputy Dean (Research & Development) Faculty of the Built Environment, University of Malaya. “In mid 1990s, refurbishment activity represented 42 per cent of the total construction output (categorised as repair and maintenance) compared to 22.5 per cent in 1970.”
Similarly, up to 50 percent of the construction budget in US was spent in the form of refurbishment of existing buildings, reveals Associate Professor Dr Azlan Shah Ali, Deputy Dean (Higher Degree) of the Faculty of Built Environment, University of Malaya.
This is pretty good evidence that as a country moves towards developed status, more of its aged buildings will undergo refurbishment sparking a trend.