The increased attention that financial institutions, investors and real estate owners pay to risk analysis regarding the purchase and sale of real estate assets has led to growth in the requests for technical due diligence reports. With over 10 years of experience in the market, Colliers has provided such services that describe in detail the physical condition of a property for almost 1.4 million square meters of space, of which about 854,000 square meters are in industrial projects.
The technical due diligence services for real estate involve both an analysis of the existing documentation according to the legislation in force – from permits and authorizations such as construction or fire safety and to the Completion Works Handover Protocol and Equipment Operations Handover Protocols – but also the identification of all essential documents that are missing from the Construction Technical Book and the assessment of the technical condition of the building. The main purpose of this analysis is to identify any significant technical defects or any inconsistencies with the specific regulations in force that may affect the market value of the property, or could offer a potential buyer the opportunity to further negotiate the purchase price due to certain technical issues.
“The list of technical deficiencies resulting from the technical due diligence report aims to inform about the significant repair costs for the main elements of the construction, such as structure and foundation, architecture, facade, roof, mechanical and electrical installations, interior finishes, equipment. Finally, the technical analysis provides a realistic view on the construction conditions from a technical point of view, but also a clear estimate of the repairs that need to be made to comply with the initial design and quality standards. This analysis also offers a level of protection, being a solid basis for price negotiations”, explains Silvia Rusei, LEED Green Associate within Colliers.
These types of services are required especially in the case of property transactions, and the main benefit is that the parties involved in the transaction will understand the technical condition and design of the property and will be able to establish its compliance status. The benefits of a technical assessment also include determining the compliance of the property in relation to the desired use, understanding the need for future costs and quantifying them, but also providing a solid basis for price and risk allocation negotiations and ensuring a level of investor protection.
In the pandemic year, the demand for technical due diligence services remained constant, especially for industrial spaces, Colliers consultants note. In fact, out of almost 1.4 million square meters of various spaces for which Colliers has provided technical services in more than 10 years of market presence, 62% are in industrial projects, and the rest are retail spaces (24%), offices (12%) and hotels (about 2%).
Among companies for which Colliers has provided such services over time are CTP – a full-service international real estate developer with more than 6.3 million square meters of Class A properties in more than 70 strategic locations across Europe, but also banks such as BRD Groupe Société Générale or Banca Transilvania. For CTP, Colliers provided technical services for 34 industrial warehouses in Bucharest, Arad, Timisoara and Caransebes with a cumulative area exceeding half a million square meters.