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Strategic Facility Planning: Helping You Thrive in a Down EconomyJanuary 17, 2013
In my previous discussion of Barry Lynch’s IFMA presentation on strategic facility planning, I touched on the concept of using this planning process to create value to an organization even in a down economy. Let’s examine how you might put this powerful benefit to work for you.
Facility renewal, or recapitalization, involves the replacement of buildings or systems as they eventually succumb to wear and tear, such as windows, chillers, roofing, carpeting or seedy-looking interiors. (It does not include installation of new equipment.) There are three different approaches for assessing your accumulated facility renewal needs and costs. The mathematical approach requires to to apply a flat annual “depreciation” rate, add each year’s replacement value to determine your needs after X number of years, and then chart those numbers to see the magnitude of your renewal needs and compare expected vs. actual expenditures. The detail cost estimate approach requires you to create a value proposition, then develop a facility renewal plan and management system based on a thorough understanding of the renewal process. The third method uses a relatively simple formula known as the Facility Condition Index, or FCI. To get your FCI, you simply divide the required facility renewal amount by the estimated replacement value. You can then apply a buy/sell/hold invest analysis to determine how you should respond to each renewal need.
Other calculations enable you to answer key questions regarding maximum facility value. Calculating vacancy projections against growth rates, for instance, will show you exactly when your capacity will max out. You can also compare your total anticipated renewal costs to the net cost of selling your existing building and putting that money toward moving into a new building. By thinking strategically, you can get every last penny of value out of your facility!