Commercial Building Renovation vs. New Construction: 4 Pros & Cons

Should I stay or should I go? Sometimes the decision to remain in an existing facility or build a new one is easy. But capacity constraints and expanded equipment needs may dictate that a new facility is in order. Or, an existing structure may have plenty of space and simply needs some updating. 

Knowing whether to renovate an existing space or build from the ground up isn’t always cut and dried, however. A company’s goals and objectives help to inform the decision, but so will the following factors:

  1. Cost Comparison
  2. Timeline & Duration of Project
  3. Design & Layout
  4. The Unexpected

1. Cost Comparison

Most often, constructing a new facility will cost more than renovating an existing structure. A big part of that cost is materials, as well as land acquisition and the related infrastructure that will need to be developed. Expanded utilities or frontage roads might need to be put in place, or environmental conditions may need to be addressed. These types of costs can add a significant price tag to a project, so work closely with a construction manager to conduct a site evaluation prior to making a land purchase, when possible.

All that said, building new could come with some cost advantages. A municipality might offer tax incentives for building within their city limits. Lenders typically compete to finance new projects, giving the owner some leverage. If the company qualifies for a Small Business Administration (SBA) loan, the interest rates are typically lower with favorable repayment terms.

RELATED: Private and Public Financing Basics for Commercial Building Construction

Renovating an existing structure — whether a current facility or one that is purchased and remodeled — usually costs less than building from the ground up. There are always exceptions, of course, such as an existing facility that needs extensive retrofitting. And, similar to how a municipality might offer tax incentives for a company to come to their community, a city might also offer incentives to stay.

2. Timeline & Duration of Project

Renovation projects are almost always completed faster than a new build because most of the main structural elements are already in place. Starting from scratch generally requires far more planning and work

There are occasions when renovations could take longer, particularly with historical buildings that require intense preservation efforts. Another caveat is whether a building owner chooses to take a piecemeal approach to renovations in hopes of minimizing disruption to their workforce, which drags out the projects. Organizations can leverage construction phasing and sequencing in both instances, but it’s important to understand the timing and cost implications. 

RELATED: Tips to Maintain Business Operations During Construction or Renovation

3. Design & Layout

A major advantage of building from the ground up is that the project owner can choose a building design that reflects the company’s brand and personality. New construction can become a showpiece within a community and practically serve as a billboard for an organization

Beyond aesthetics, a new building’s layout can be designed to an owner’s exact specifications. In the case of manufacturing, for example, the production floor can be configured to optimize workflows and material handling. Modular office structures can offer the flexibility to reconfigure portions of the facility in the future. 

Renovating typically comes with design and layout limitations. That said, some buildings have historical significance and unique features that deserve preservation, such as intricate brickwork, stone columns, ornate woodwork, and artistic elements. Sometimes, these types of features simply can’t be replicated in new construction, or could come with considerable expense.

4. The Unexpected

Generally, the older the building, the more surprises you’ll get. When tearing down walls and ceilings of an existing structure, you may discover costly remediation requirements: from asbestos and water damage to pest infestations or code violations. There are generally fewer surprises with new construction. 

One thing to keep in mind on a new building site, however, is the potential for unsuitable soils. Previous contamination or high water tables can require special measures such as dredging or pile foundations. 

In the end, renovations and new construction both have their pros and cons. Weighing your options needs to include the insights provided from a thorough site evaluation and consultation with a construction professional who knows what to look for and which questions to ask

There are questions every project owner should ask, too. Download our helpful guide below to know which questions to bring to the table. And, contact our construction experts to explore which direction makes most sense based on your needs and future plans. Get in touch today.

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