As a business owner, purchasing your own commercial property is a big decision. An even bigger decision is whether to purchase and renovate an existing building or build from the ground up. Before you determine which one is right for you, consider these facts about both.
The facts about renovation
1. Renovation are affordable
Costs have been rising. So, the cost of land, labour, and materials to construct from the ground-up will be a big one compared to purchasing an existing building and renovating. There will always be exceptions to this rule.
Generally speaking, land and construction expenses outpace the cost of buying and renovating. New construction experiences more change orders and cost overruns which only serves to increase the cost.
You can also make targeted decisions about which areas of the existing building need the most investment. That way, you can ensure your budget works as hard for you as possible. And, during this year, bathroom renovations have significantly grown in demand.
2. Renovations are quick
Generally speaking, it is quicker to renovate an existing building than it is to build from the ground up. Even a full-scale remodel is going to be quicker than a ground-up construction job. If time is of the essence, then purchasing an existing building and opting for renovation is in your best interests.
Additionally, there have been construction material shortages. This will impact both renovation and ground-up construction but will hit the latter far harder as more materials are needed. It isn’t at the crisis level, but these shortages may contribute to serious construction delays for ground-up projects.
3. Renovations create opportunities
A renovation might not tick as many boxes as a ground-up job, but you can still create a dream building. A renovation is an opportunity to make massive improvements to a building. It is also an opportunity to customise it accordingly.
It’s your opportunity to create a property that meets your needs rather than taking the typical cookie-cutter approach. You don’t lose out on customisation simply because you opted for a renovation over ground-up construction.
The facts about ground-up construction
While a renovation is more affordable, ground-up construction does have its own financial advantages. It’s a competitive market, so lenders are keen to work with owner-occupied properties.
It puts the borrower in a great position to secure the finance necessary to make the project happen. That’s not the only financial advantage. Lenders often apply a construction contingency, usually 10%, to the project’s cost.
This serves as security against change orders and overruns. During the construction stage, you will likely only make payments against the loan’s interest.
1. You can create a show-piece
The major advantage of ground-up construction is that you have total control over both the design and look of the building. If you want to create a distinctive design, unique configuration, or an impressive entry, ground-up construction is the way to go.
If you plan to seek a tenant, a franchise business may be attracted to a stand-alone property that was built from scratch. There are franchise requirements to be met and stand-alone, ground-up construction is often one of those requirements.
So, it’s important to think about the long-term plans for your building. Wherever you are building, a distinct property can help you attract more attention for your business. A showpiece might just be what you need to increase your revenue. That brings us to the final point.
2. It impacts resale value
This can go either way, but a new build is going to impact your resale value regardless. When it comes time to sell, you may struggle to find a buyer if it is too distinct. If it is too high-end, you might struggle to secure the price you are looking for. These are all factors to consider when choosing whether renovation or ground-up construction is right for you.
There you have it. There are benefits to both, and it comes down to you. Generally, the biggest factor in these situations is cost and if cost is of great concern to you, then it’s likely the renovation route will win out.
As tempting as ground-up construction is, life tends to be far simpler when you buy and renovate. Though, you should always have an inspection carried out to ensure you are making a strong purchase.