Depreciation stage of a building

In fact, as soon as brand new building is completed, it immediately experiences depreciation due to physical deterioration from normal wear and tear, functional obsolescence due to changing market preference in building design features, and external obsolescence which relates to condition outside the building itself such as increase of crime rate in the area, economic recession, or closure of major industry.  

The effect in the value of buildings of the recent eruption of Taal can also be considered as an external obsolescence particularly for properties in the danger zones.

Maintaining your building

In local valuation practice, buildings are usually assigned an economic life of between 30 to 50 years. However, with regular maintenance and upkeep and when necessary major renovation and upgrading of its facilities, the expected life of a building can be prolonged beyond this. 

Some of these may help slow down your property’s depreciation: 

  • Maintain fresh coat of paint 
  • Change old fixtures and de-clutter your space 
  • Maintain cleanliness and proper waste disposal 
  • Change flooring 
  • Renovate some parts of your building

Success story

A good example of this is the Insular Life Building. Constructed in 1962, it is already nearing 6 decades. A few years ago, the owner of the building contemplated tearing it down and constructing a new one. However, with its renovation in 2017, it has somehow regained its former glory and can command rent similar to newer buildings.

Colliers View

Buildings have finite lives. But with proper maintenance,timely renovation and upgrading of facilities, barring external factors (force majeure), Colliers expects buildings to still have substantial value beyond their normal life expectancy. 

In the Philippines, building design should consider the yearly typhoons and occasional earthquakes. Furthermore, applying a forward-looking design to “future proof,” which incorporates building efficiency and wellness of occupants, will give any building a good chance of exceeding its expected economic life.