Commercial Remodeling, Renovation, and New Construction
In today’s dynamic commercial real estate space, deciding to renovate or remodel an existing commercial building or build a new facility from scratch is complex. Weighing the pros and cons of commercial renovation and new construction has immediate and long-term benefits and consequences. Explore just a few factors to consider when your team must decide to renovate or build new.
Commercial Renovation and Remodeling vs. New Construction
While the precise factors vary by industry, every business faces at least a few shared considerations.
Construction vs. Renovation Costs
Renovation Costs: Renovating an existing commercial building is usually less expensive because the foundational elements are already in place. This significantly reduces the volume of raw materials required, especially if substantial components of the building can be preserved. In some cases, local municipalities may incentivize businesses to stay exactly where they are with tax credits or related commercial programs.
Construction Cost: More material and more labor means building a new commercial property is typically much more expensive. There are scenarios where new construction has a better return on investment, however, especially when production capacity or quality are improved over the old design. Some financial tools, including SBA loans, may have more favorable loan terms. Like remodels, local governments often offer tax incentives for new builds.
One variable worth exploring between these options is whether your organization can keep working during construction or renovation. For example, building new may allow you to maintain production and generate revenue before moving, where renovation may cause delays and stoppages.
Project Timeline
Renovation Timeline: Renovations are usually faster than new construction. With the structural and foundational elements in place, teams can focus on updates, not the entire facility.
New Construction Timelines: In most cases, building from scratch will take longer, especially when permitting and planning are taken into account.
For both costs and timelines, it’s hard to account for the unexpected, and every project faces at least a little turbulence.
Older buildings may have unforeseen asbestos issues, water damage, or unknown code violations.
New constructions may face site problems like high water tables or remediation requirements.
How to Decide Between a Commercial Renovation and New Build
It’s always best to make these decisions with an experienced commercial contractor, in addition to your leadership team. Keen Technical Solutions will help you understand costs, tax incentives, timelines, and other important details that impact your decision. Here are a few questions to ask as you begin the process.
Am I looking for a visual or structural change?
Renovation and remodeling are better suited for modernization and design updates, such as changing the layout of the building (e.g., adding or removing walls) without significantly changing the footprint.
New construction is a blank slate for all of those updates, often with more square footage and other application-specific changes, such as adding a larger receiving area or additional storage.
Which change will increase capacity and capabilities?
Renovation should increase your productivity to a degree by redeveloping the space to meet new priorities. For example, with more remote workers, you may be able to eliminate existing office space and expand production space, even bringing in more machinery.
Construction allows you to meet increased recent demand and forecasted demand as well.
Which change offers the best return on investment?
This is where Keen comes in. We’ll help you determine whether commercial renovation costs offer superior near- and long-term returns compared to new construction, as well as the break-even point for both projects. It also requires accurate industry and market forecasts, a solid understanding of your current finances, and careful consideration of lending rates and tax incentives.
Of course, both renovation and new construction should prioritize energy efficiency throughout. Investing in the right lighting, HVAC, and other building elements, and even meeting LEED certification, are smart ways to tap into related tax credits and incentives and lower operating costs long-term.
Start Your Next Project with Keen Technical Solutions
As one of Michigan’s top commercial renovation contractors and property development companies, we’ve helped dozens of organizations make informed, confident decisions on behalf of their business. Start your project by contacting an experienced commercial renovation project manager today.