Does Size Matter?
Is bigger better, or is it more about what you do with it …
There’s a medium to long-term trend towards increasingly large strata buildings across Australia and internationally that is welcomed and championed by many strata stakeholders. And, with that trend come assumptions that bigger is better. But, whilst there are advantages to bigger strata buildings, there are also some drawbacks to consider …
[8.75 minutes estimated reading time, 1742 words]
Introduction
Last year I wrote about why smaller strata buildings are an attractive option in ‘Are Small Strata Fish Sweeter?’.
But, small strata buildings are increasingly rare [except for the luxury end of the market] these days as development trends and economic forces over the last 20-plus years have created increasingly large strata buildings across Australia and internationally.
It’s largely assumed that bigger is better for strata buildings for most strata stakeholders. But, that’s not always true as I explain in this article.
Why bigger is better
Bigger strata buildings have many features that are attractive to the main types of strata stakeholders as follows.
Developers benefit from larger strata buildings because of things like.
Economies of Scale: Building larger strata apartment complexes often allows developers to benefit from economies of scale, reducing construction costs per unit.
Higher Profit Margins: With more strata apartments, developers can potentially generate higher revenue and profit margins.
A Diversified Portfolio: Larger strata developments can help developers diversify their portfolio and reduce risks associated with individual properties.
Enhanced Reputation: Successful development of high-density strata buildings can enhance a developer's reputation, attracting more opportunities.
Strata managers enjoy the following benefits from managing larger strata buildings.
Streamlined Management: Managing a single large strata building is often more internally efficient than managing multiple smaller ones, reducing administrative overhead, and, thereby, higher profits.
More Stable Strata Levies: Having a larger number of strata lots in a building ensures a steady stream of strata levies, which makes it easier to cover expenses and to maintain and improve the strata building.
Fewer Meetings: Managing fewer larger strata buildings, rather than multiple smaller ones, means strata managers have fewer meetings to arrange, attend, and document.
Easier Decision Making: Larger strata buildings can meet more often making decision-making processes smoother, as there are fewer stakeholders to consult.
Strata Owners (and Residents) typically enjoy a range of advantages when in larger strata buildings like these.
Amenities: Larger strata buildings usually offer more amenities such as gyms, pools, and communal spaces, enhancing strata owners’ and residents' quality of life.
Cost Sharing: The costs of maintaining and repairing the strata building are distributed among more people, potentially lowering individual financial burdens.
Affordability:
Community Benefits: A larger owner and resident cohort can foster a stronger sense of community and social engagement.
Governments favour large strata buildings because.
Urban Density: High-density strata developments can support government goals for urban densification, reducing urban sprawl, and promoting sustainable land use.
Tax Revenues: Increased strata property values and more strata properties in high-density areas can lead to higher property taxes, providing additional revenue for governments.
Transportation Efficiency: Concentrated populations in high-density areas can make public transportation more economically viable and reduce traffic congestion.
Environmental Benefits: High-density strata living can reduce the per-capita environmental footprint by promoting energy-efficient construction and reducing commuting distances.
Strata Service Providers like larger strata building customers since they get.
Increased Work Flows: Larger strata buildings generally create more work [in volume and frequency] and, consequently,
Economies of Scale: Strata service providers like internet and cable companies may find it more cost-effective to serve a large number of residents in one location.
Predictable Demand: Knowing that there are many residents in a single building can help service providers plan and allocate resources more effectively.
There are also many many other advantages to larger strata buildings for strata stakeholders that apply differently in their individual circumstances and according to their individual preferences.
So, it’s desirable and inevitable that we’ll be seeing more larger strata buildings in the future.
But, are there disadvantages to larger strata buildings, and, what are they?
However, there are also disadvantages that come with larger strata buildings that adversely affect strata stakeholders; in particular, for strata owners and residents.
I can think of 18 as follows. Some are structural, some are operational, and some affect amenity.
1. Limited Privacy: In larger strata buildings, strata owners and residents may experience reduced privacy due to the proximity of neighbours and the potential for noise transmission through shared walls and floors. This can lead to increased conflicts and a less peaceful ownership and living environment.
2. Maintenance Costs: Maintaining common areas, amenities, and building infrastructure in larger strata complexes can be costly, and proportionately costlier per strata lot than smaller buildings. So, strata owners can face higher strata levies to cover these expenses, which can be a financial burden.
3. Strata Governance Issues: Managing a larger strata building can be more complex and challenging than smaller ones. Strata owners may struggle with decision-making, resolving conflicts, and ensuring effective governance. Disagreements among residents can lead to disputes and legal issues. These challenges also affect strata and building managers.
4. Limited Sense of Community: In larger strata buildings, it can be more challenging for strata owners and residents to build a sense of community and get to know their neighbours. This results in a lack of social cohesion, disaffected owner sentiment, and, feelings of isolation which have significant social impacts.
5. Parking and Traffic Congestion: Large strata buildings often have limited parking spaces as a result of planning controls, which can cause parking problems and increased traffic congestion in the area. Strata owners and residents may struggle to find parking, and the neighbourhood infrastructure may be insufficient to handle the increased traffic.
6. Elevator Wait Times: In taller strata buildings, elevator wait times can become significant during peak hours. This inconvenience can be frustrating for strata owners and residents, especially those with mobility issues and/or children.
7. Emergency Response Challenges: Evacuating large strata buildings in emergencies, such as fires or natural disasters, can be more complex and time-consuming. There can also be challenges moving people via elevators in medical emergencies. Thus, adversely affecting the safety of all strata owners, residents, and visitors.
8. Limited Outdoor Space: High-density and large strata buildings often have limited outdoor space, such as green areas or parks. This can be a drawback for families with children, people who value outdoor recreation, and, strata owners and residents generally.
9. Noise and Security Concerns: Larger strata building complexes may attract more visitors and non-residents, potentially leading to increased third-party noise levels and security concerns leading strata owners and residents to feel less secure.
10. Resale Challenges: When it comes to selling, strata owners in larger buildings may face challenges due to increased competition within the building itself or from neighbouring large strata buildings because buyers have more choices. This can affect the ease of selling strata lots, the time it takes to secure a sale, and, property values.
11. Aesthetics and Skyline Impact: Some people believe that larger high-density strata buildings negatively impact the aesthetics of a neighbourhood or skyline. Or, they can create a loss of light and reduced breezes.
12. Lots More Regulation: Larger high-density strata buildings are usually subject to more extensive and complex regulatory requirements under strata and other laws. Compliance with building codes, zoning laws, health and safety controls, strata laws and regulations, etc can become more challenging, time-consuming, and expensive.
13. Smaller Majorities and Bigger Minorities: In larger strata buildings, it's possible for certain groups or factions of strata owners to gain more influence and control due to low strata owner participation levels. Conversely, minorities can be bigger with more strata owners being disenfranchised by decisions they don’t agree with. All of which potentially lead to increased frequency and size of disagreements and conflicts over governance.
14. More Unhappy Owners: With a larger and more diverse group of strata owners and residents in larger strata buildings, there is an increased likelihood of varying preferences and expectations. This can also result in a greater number of dissatisfied or unhappy strata owners and consequent disputes.
15. More Strata Owners to Deal with on the Same Issues [Negative Productivity]: Decision-making processes can become less efficient in larger strata buildings as more strata owners are involved in discussions and voting. Additionally, communicating information to and answering multiple queries [which are often the same] from a larger group of strata owners and residents is time consuming. This can lead to delays and decreased productivity when addressing common issues or making decisions about strata building maintenance and improvements.
16. Higher Average Strata Levies: The costs of maintaining larger high-density strata buildings, including common areas and facilities, is often higher because of the increased facilities and amenities in the buildings [elevators, HVAC, BMU, pools, gyms, roof areas, cinemas, etc] and the higher services provided [building managers, concierge, security, cleaners, etc] can lead to proportionately higher strata levies than in smaller buildings. This is contrary to the expectation of cost savings through economies of scale
17. BMC or Umbrella Group Membership: In some cases, larger strata complexes may be part of a building management committee [BMC] or an umbrella group that coordinates various aspects of building management and maintenance. This additional layer of organisation introduces complexity, administrative overhead, delays, and costs. It also means that a strata building’s [and its member strata owners’] decision making powers and autonomy are reduced on many issues.
18. Complex Title and Management Documentation: The underlying title and management documentation for larger strata buildings [strata plans, by-laws, covenants, management statements, etc] are typically longer, more complex, and, highly technical. They are also usually unique to the strata building complex. So, it’s harder for strata owners, residents, managers, and others to know and understand the fundamentals of the building.
These disadvantages highlight the challenges and complexities that can arise in larger high-density strata buildings, which may impact the overall satisfaction and well-being of strata owners and residents.
They’re not reasons to avoid larger strata buildings but they do mean, that higher knowledge levels, more focused and effective management, clearer and more frequent communication, and, proactive problem-solving are needed to mitigate the impact of these issues in larger strata buildings.
Conclusions
We are all tempted to want something bigger.
But, for some strata stakeholders, maybe bigger is not always better.
Perhaps, it’s more about what you do with it in your strata building that matters.
September 26, 2023
Francesco ...