Hedonic price estimation of the financial impact of obsolescence on commercial property buildings

An argument is developed for a new framework for design, to assist in overcoming barriers to the implementation of environmentally responsible solutions for building design. Though there exist the technical solutions to move towards more environmentally benign building practices, the vast majority of building designers do not employ these solutions in their designs. Past studies of building obsolescence showed that uncertainty in forecasting the financial impact of obsolescence has resulted many commercial office buildings to reach the end of their economic life earlier than expected. If the financial impact caused by the attributes 1 of obsolescence are estimated, analysed and forecasted during the design and cost planning stage of a building, the impact can be minim ised, which would prolong its economic life. Hedonic price models can be used to measure and analyse the financial impact caused by attributes of obsolescence on commercial office buildings. The rental difference between the highest rental value of buildings in the office market and the rental value of an office building, is used as the measurement of the financial impact. The research conducted three surveys; the first survey confirmed that most of the hypothetical variables are important; the second survey ranked the locations and the building finishes for developing their measurement; the third survey confirmed that most of the high priority groups, sub-groups and variables suggested by the hedonic price models are matched with the opinions of property managers and tenants of office buildings. There are many groups of variables affecting the level of building obsolescence such as flexibility which includes flexibility of the building's layout to accommodate change in the use of the space and flexibility of a building's structure to accommodate new information technology; quality of building engineering services; image and appearance; location; and building age. The hedonic price models showed that good appearance and greater flexibility are the most important groups affecting the level of financial impact on a building. The financial impact caused by obsolescence on a building is significant in first 15 years of its life. The robustness of the hedonic price models were tested and the models are reliable for forecasting the financial impact of obsolescence in commercial office buildings.