Is it Cheaper to Renovate or Tear Down?
We have been the architect on recent projects where the question “Is it Cheaper to Renovate or Tear Down?” has come up. There is an easy answer to this question, but the short of it is “it depends.” Knowing a few things about a building and the new use suffices to answer this question. Our situation in Maine throws a curve, but it’s a manageable one.
Clients may purchase a building only to find it is of marginal value. The building might be old. It might be poorly insulated. It might lack basic accessibility features. It might be about the size building they need, but without a suitable layout. As design on the renovation project progresses, an architect may offer an opinion of probable cost that shocks the owner into thinking, is it cheaper to renovate or tear down?
Let’s face it. Maine is full of poorly constructed buildings. These buildings were built on the cheap. They stood little chance of lasting a long time. An owner may have thought they purchased a building with a certain value, when they actually bought a piece of land with a building of little value. The building needs the major renovations to support new functions, but also needs corrective work to meet minimum requirements for the health, safety and welfare.
When does a building become worth saving, and when is it a tear-down? One needs to look at structural integrity and energy efficiency, fit for the new use, and residual value.
It’s Snowy up in Maine
As a practical matter, structural integrity is perhaps the first question that needs to be addressed. We and the client are almost always in agreement that energy efficiency is important. Energy efficiency is tied to structural integrity. As buildings become more energy efficient, they stop leaking heat. Heat leaking through roofs melts snow, reducing snow build up. A roof must be strong to hold snow. Few older buildings were designed to hold up the snow loads used in current codes. These older buildings require structural upgrades in order to stay both safe and energy efficient. We have worked on projects where it made financial sense to reinforce the existing roof, and others where it made sense to tear off the roof and build a new roof.
Another factor that determines whether it is cheaper to renovate or tear down is the similarity of the old use and the new use. An office that will become apartments may require major life safety upgrades, including new stairs, new (bigger) windows for egress, and sprinklers. Almost any building that will become an assembly space- concerts, lectures, meetings- will require similar upgrades.
If a building requires so much effort to renovate that it is cheaper to tear down, would it have been better to buy an empty lot? The answer may hinge on the residual value of the developed site and foundation. About 25 percent of the cost of new construction is spent on sitework and getting out of the ground. A driveway, power from the street, water and sewer service, parking, and even site clearing are costs associated with new construction that can be avoided in a major renovation project.
Is it cheaper to renovate or tear down? Spending a few hundred or even a few thousand dollars on a professional opinion can answer that question, even before the purchase.