By Pam Brenner
As businesses explore their space options, they should carefully examine their
business needs, location costs and benefits, and the valuation of every building
prospect. Business needs include timing, cost, image, and/or location factors.
Timing. In the time it takes to secure land, complete a site
analysis, and develop preliminary architectural plans for a new facility, an
entire building renovation can be completed, start to finish.
Cost. It can cost as much to renovate an existing building as
it does to build from scratch. However, with phased interior construction, businesses
may be able to occupy space as it is renovated, resulting in net occupancy cost
Image. The prestige associated with prime landmark buildings and
historically significant structures builds corporate image, public relations,
and good will.
Location. Proximity to customers, workers, vendors, distributors,
or transportation, coupled with tax structures, commute times, and residential
options for workers, may also be important factors. Location analysis should
include transportation infrastructure, zoning and land use strategies, and environmental
Comprehensive valuation entails evaluating a building's capacity to provide
adequate thermal and IAQ control, sufficient electrical performance and quality,
and adequate telecommunications connections. The financial feasibility of retrofitting
depends on three key factors: the flexibility of the building infrastructure,
the value of the existing investment, and the cost of alternative building options.
Building infrastructure is key. Many buildings built before the advent of electric
lighting and mechanized ventilating systems in the 1930s are candidates for
renovation. Because they relied on windows for illumination and ventilation,
these buildings have more daylight, smaller floorplates, and greater floor-to-floor
heights than many more modern structures. In addition, mechanized HVAC services
were added as post-construction retrofits, so these services are not deeply
imbedded in the building structure. On the other hand, buildings from more recent
decades may pose challenges. Built for economy and energy efficiency, many are
too tightly constructed - with huge floorplates, deeply imbedded services that
prevent adequate air exchange (in extreme cases, causing Sick Building Syndrome),
and minimal floor-to-floor heights.
Existing investment in a building affects the financial feasibility of renovation
options. Depreciation schedules, debt ratios, operating costs, revenues, and
tax liabilities are all part of the equation. Tax implications of renovation
costs vary widely. Most capital improvements follow a 39-year depreciation schedule.
Personal property improvements, however, are generally on a seven-year depreciation
schedule. Planning renovations to shift the financial burden from capital improvement
to personal property costs can result in tremendous tax savings. Even dormant,
truly obsolete buildings - older vacant structures, which could not be profitably
renovated and leased with traditional construction methods - may be candidates
for reclamation with new solutions that integrate architecture, furniture, and
Alternative options are also major factors in deciding whether to renovate
or build. In one case, a business elected to renovate existing warehouse space
into Class A office space because a move would have displaced half the trained
workforce. The combined costs of construction and replacing workers were greater
than the single cost of renovating existing space.