Re-examining the costs and value ratios of owning and occupying buildings

Average ratios, over the whole life of the assets, of construction cost to facility management cost to the cost of operating buildings to value added by that operation, for buildings of a given function, are potentially useful. They provide a benchmark or norm for those making key decisions about getting best whole-life value for money from a proposed new building, and a starting point for research to discover the reasons for a variance in the ratios in individual buildings about the means. Such ratios and research can be the basis for the case that 'better buildings' can add more to whole-life value than they add to cost. It is unfortunate, therefore, that in the UK one particular proposition about 'typical' ratios (that they are, respectively, of the order, for most workplace buildings, of 1 (construction)/5 (facility management)/200 (operation)), has become widely cited and accepted amongst policy-makers and practitioners. It is argued here that these proportions are exaggerated, and that the difference of mean ratios between buildings of different functions is sufficient to require function-specific ratios. An economically valid conceptual framework is set out to classify costs. This framework is then applied to the best available datasets for Central London office buildings (finding that in this case 1/1.5/15 is approximately the mean proportions appropriate for benchmarking purposes). It is suggested how this common framework can be applied to analyse data and calculate mean ratios for buildings of any function, in any country. This whole-life economic cost and value method is compared with another method in widespread use by building occupiers: the 'total costs of occupancy' method. Propositions about how 'good design' might affect whole-life value for money can be explored if both benchmark and single-project data exist for the ratios of the costs of operation to construction costs, on the one hand, and of value added to costs of operation, on the other. Although broadly adequate data exist for most building functions on construction cost and for some building functions on facility management cost, there is a lack of adequate published data on both operating costs and the value added of buildings. To address this problem, a programme of research is recommended to fill these gaps.