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Seismic upgrade

Seismic Upgrade – Improving the Value of Your Investment

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New Zealand is a seismically active country. The disastrous events of last century – Napier 1931 and this century Christchurch 2011 and Kaikoura 2016, only highlight the enormously destructive and powerful effect earthquakes have on safety, human life, land and property.

Under the new national system for managing earthquake-prone buildings in New Zealand (that came into effect on 1 July 2017), the owners of earthquake-prone buildings, territorial authorities (local councils), engineers and other building professionals now have well documented roles, responsibilities and importantly time frames to bring about change and improvement.

Under this legislation:
The Territorial Authority must identify potentially earthquake prone buildings and communicate with the Building owner through an Earthquake Prone Building (EPB) notification process.

  1. As an owner; upon receiving this advice, you must obtain an engineering assessment of your building and provide this back to the Territorial Authority.
  2. The Territorial Authority will determine whether the building is earthquake prone and a risk. The Authority will assign the building a rating and whether it is a priority and record this on a publicly available register.
  3. The owner will then (within the deadlines shown below) consider the business case to undertake the required structural design and construction to strengthen the building or demolish and rebuild.

The Building Act 2004 divides New Zealand into three seismic risk areas – high, medium and low, based on the risk profiles as shown by the map of New Zealand below. 

Please refer to MBIE and managing Earthquake Prone Buildings for further information.

Section 133 of the Building (Earthquake-prone Buildings) Amendment Act 2016, specifies the deadline that a building owner has from receiving the EPB notice to either completing the seismic upgrade or demolishing the building noting that the deadline is the expiry of whichever of the following periods, as measured from the date of the first EPB notice issued for the building or the part of the building (rather than any replacement EPB notice), is applicable:

  1. Low seismic risk, 35 years for any building;
  2. Medium seismic risk, 12 years and six months for a priority building and 25 years for any other building; and
  3. High seismic risk, seven years and six months for a priority building and 15 years for any other building.

This legislation also provides for Territorial Authorities requiring owners to attach notices in a prominent place on or adjacent to the building advising the building is earthquake prone.  If a building is less than 34% New Building Standard (NBS) it is classified as being earthquake prone.

Benefits:
Whilst there are costs involved in completing the seismic upgrade, there are nevertheless some tangible medium to long term benefits.

Tom Bretherton, Envivo, Managing Director, recently attended a Bayleys auction of Commercial property and it quickly became apparent that properties with upper quartile to 100% NBS ratings were attracting strong bidding and good sales figures compared to those with a low NBS and unknown potential.

Tom spoke with Mr Alan Haydock of Bayleys (Commercial Sales manager Auckland City and Fringe) following this and he kindly provided the following summary:

“Your observations are correct. There is currently a two-tier market with primary and secondary assets. The biggest controlling factor in the market is bank funding. Due to the constrained nature in lending the banks are more willing to fund assets that have an Initial Evaluation Procedure (IEP) > 67% NBS, a WALT (Weighted Average Lease Term) >three years and will lend on an income to interest rate coverage of 2:1. As a consequence, assets that have these attributes as well as being asbestos free are performing better as there are more buyers able to fund them. Secondary assets are struggling as they are difficult to fund. On a macro scale we have a generation of retiring baby boomers looking for income and wanting safe passive property assets.”

Please contact Alan if you have any questions about Commercial Real Estate sales.

Insurance premiums and leasing potential are also known to be significantly improved when buildings have at least a 67% NBS.

Envivo’s structural engineers, led by Mr Wilhelm Wolfaardt are experts in this field and are familiar with legislation, changes to earthquake-prone building provisions, the requirements set by new tools, including the EPB methodology and the Engineering Assessment Guidelines.

We would be pleased to assist you in not only adding value to your property, but also providing a safe working environment for your tenants. Contact our Structural Engineering team to discuss your requirements.

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