Asset Management

Sherwood fire sparks timely warning about Property Insurance

The recent warehouse fire in the Brisbane suburb of Sherwood should send a significant warning to property owners and managers about property replacement cost assessments. The damage to the Sherwood warehouse was massive. From a property owner’s perspective, it was critical that they were not under-insured.

 

Unfortunately, all too often we see companies that lose their assets (due to fire, flooding etc) without first ensuring they are adequately insured. This is an expensive mistake.

 

Everyday, property owners are at risk of under-insurance due to a variety of factors. The case study below demonstrates the difference between an insurance replacement cost assessment prepared by a qualified Quantity Surveyor and a property valuation estimate.

 

The example is based on a 10,000m2 property which has a 4,000m2 industrial building, including a 500m2 office component.

 

Item

Quantity Surveyor

Valuation

Current building replacement cost

$2,480,000

$2,480,000

Additional building cost for office areas

$290,000

$290,000

Cost of external hardstand, landscaping and services

$600,000

Not considered

Demolition cost of existing structure

$240,000

Not considered

Demolition cost of existing hardstand

$120,000

Not considered

Additional cost of asbestos removal

$200,000

Not considered

Additional costs to achieve current building code compliance

$100,000

Not considered

Replacement cost of Landlord owned tenancy fitouts

$250,000

Not considered

Total replacement cost

$4,280,000

$2,770,000

Cost of re-design and professional fees

$270,000

Not considered

Cost of council fees and charges

$80,000

Not considered

Total development costs

$4,630,000

$2,770,000

Cost escalation between disaster date and final completion of new building (18 months)

$463,000

Not considered

Total replacement cost

$5,093,000 (1,273/m2)

$2,770,000 (692/m2)

 

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