_Why is a vendor survey crucial?
Surveys are core to most investors’ property acquisition strategy. Holistic surveys provide prospective asset purchasers with a transparent readout of a property’s technical specifications, structural integrity, operational performance and ESG credentials. By the point of purchase, the well-prepared buyer who makes use of surveys will have learned almost all there is to know about the asset they’re acquiring. This informs the acquisition price and gives investors a clear window into potential long-term capex requirements.
Sellers can also benefit from this due diligence by early engagement with surveyors, with the importance of vendor surveys in creating effective sales strategies often overlooked.
Vendor surveys can help control the sale process and give prospective sellers an insight into the overall condition of their asset, which can be used to understand upcoming CAPEX commitments to proactively manage or develop a defensive position.
Andrew Burt, Head of Commercial Building Surveying at Knight Frank, explores the top 3 reasons why vendor surveys are crucial.
1. Streamline vendor processes and mitigate risk
Key issues encountered by our surveyors during inspections include building and MEP defects, fire safety concerns, health and safety issues, dilapidation matters and missing documentation. In particular, documentation can be missing or poorly maintained, and it’s common for the contents of this information to have maintenance and/or CAPEX implications.
Late identification of these issues can result in last-minute price chipping and damage the reputation of sellers and their assets in the market.
With sufficient foresight, vendors can use report findings to mitigate these risks by addressing technical or structural issues, commissioning the requisite assessments for documentation purposes and investing in EPC upgrades to increase the sustainability credentials of assets.
Vendor reports have the added benefit of offering reliance to the purchasers on their findings, speeding up the sales process and avoiding the need for additional due diligence investigations.
2. Enhance value opportunities
Vendors don't need to rely on purchasers’ pre-acquisition surveys alone to gain an understanding of the condition of their asset. Early engagement with surveyors allows vendors to learn more about the factors influencing sale value and can also unlock opportunities to undertake remedial works to enhance valuations.
Early engagement with surveyors to commission these assessments is therefore vital; being made aware of any necessary remedial work 6-12 months prior to bringing an asset to market affords the time to take corrective action and maximise its sale value. For example, upgrading the ESG credentials of an asset following the identification of opportunities for improvement through vendor surveys also allows assets to enjoy green rental premia, increasing their marketability to prospective purchasers, while completing any outstanding maintenance works helps the seller defend against any price chips and contingency pricing.
Furthermore, the appointment of surveyors to prepare vendor due diligence closer to the point of sale enables the seller to manage these risks and make informed decisions during the sales negotiations.
Sellers should feel empowered to control the sale process and partner with advisers to unlock value-creating opportunities through vendor surveys. Finding a trusted partner before bringing an asset to market can have a material impact on valuations and procedural costs, giving investors the best chance of crystallising value through a sale.
3. Stay on top of ESG requirements
Specialist surveys summarise increasingly critical sustainability credentials and improvements required in energy efficiency, along with a strategy to present to purchasers for achieving expected changes in MEES requirements. They also consider other important environmental considerations, such as contamination and flood risk. Identifying such issues will allow prospective purchasers to make early informed decisions about CAPEX expenditure and their strategy for the asset.
Additionally, an overview of the status of the necessary documentation is provided, covering statutory consents, building work contracts and warranties, health and safety documentation, testing and commissioning records and fire risk assessments. All of which can support/advise on ESG reporting.
Learn more about how we can help with commercial building surveying
Our technical assurance services cover the practical aspects of owning, leasing, maintaining, developing, and investing in commercial property.
If you'd like to speak to someone about building surveying, please get in touch with Andrew Burt, Head of Commercial Building Surveying.