Running costs indices for commercial buildings using the hedonic price imputation approach: a case of Sri Lanka

Abstract

Running expenses of a building consume a substantial share of its total life cycle cost and range between 70 and 80% in commercial buildings. Despite this, investment decisions are primarily based on construction costs due to the absence of a reliable estimate or forecast of costs in-use. In such a context, having running cost indices that incorporate building characteristics would enable investors to predict the running costs of a building at the early phase. This study is aimed at developing running cost indices for commercial buildings by taking Sri Lanka as a case. The running costs and building characteristics data were collected from a sample of 46 commercial buildings and analyzed using the hedonic price imputation approach, which enables the prediction of costs in absence of cost/quantity data. The hedonic indices developed in the study shows an increasing trend of running costs with varying degree of 0.37, 0.30, and 0.28% quarterly for offices, banks, and all commercial buildings, respectively. This prediction of trend would assist commercial developers to capture the movement of the running costs of commercial buildings and thereby optimize the running costs in the early design stage. This study further highlights the hedonic price imputation approach as a promising method for constructing index values where there is no adequate and reliable historical cost data.