Majid Riahi

Long-term success in commercial ground up construction depends on a range of important choices, especially for the most profit-driven of commercial construction companies (as all good ones are). Some of these choices may appear small and relatively insignificant; others will be big and—in all honesty—so significant as to be intimidating. Few choices, however, are as large,  as important or as worry-inducing as the choice between ground up construction and renovation. It’s a major decision, one that could make or break a property investment. That’s why we’re here to guide you through the ups and downs of both options.

Ground Up Construction and Renovation – What’s the Difference?

It’s pretty simple. Whereas one—renovation—involves reworking, redesigning and remodeling an existing property, the other—ground up construction—instead involves creating an all-new property from scratch. That means potentially knocking down an existing property, laying all-new foundations, handling the brickwork, erecting scaffolding as well as a million-and-one other jobs, big and small. It’s the whole shebang, and even with the much-needed help of building contractors it’s a lot of work. So why would anyone be interested in it?

Ground Up Construction Advantages

While you’ll always be restricted to some extent by safety laws, local building standards and other buildings regulations, ground up construction offers dramatically more freedom than renovation. Budget permitting, ground up construction lets you construct a property exactly how you envision it. If you’re looking to build a property for a specific purpose, particularly a niche one, this can save you from a myriad of future expenses as well as make your property stand out to those niche buyers (who are likely willing to pay above market average).

For an example of how ground up construction can save you money as a Landlord, look to the potential cost of tenant improvement allowances. This is a pre-arranged sum you will need to provide to your tenant (typically for a business location) in order to cover the cost of renovation and of making the property suitable for their needs or the needs of their business. By building a property from the ground up with a certain set of needs in mind, you can mitigate those tenant improvement costs and get business owners flocking to your property!

Finally, ground up construction gives you the ability to outfit your property with the latest cost-saving, energy-efficient innovations. Often, these are too much of a hassle to implement in renovations, yet they stand to increase the price and attractiveness of even a basic property.

Renovation Advantages 

Of course, renovating an existing property comes with its share of advantages too. For one, it’s significantly less intensive in terms of labor, cost and time. With an existing property, most—if not all—of the essential components will already be in place: from the foundation to the electrics, it’s all there and ready to go.

Additionally, the reduced cost and risk of renovations mean that it’s far easier to get funding from property development financiers. The more ambitious a commercial construction project is, the greater the risk of failure. With a renovation project, especially one with thorough planning behind it, there’s little risk (relatively speaking) in the eyes of lenders, and so they’ll be far more willing to lend you the cash you need.

Ground Up Construction Disadvantages

Bureaucracy can be a pain, but it’s a fact of life, and in construction it exists primarily for our safety. Unfortunately for you, if you opt for a ground up construction project, it also means that you’ll need to acquire discrete permits for each facet of the construction process. Building, paving, landscaping, electrical, plumbing and more. You’ll need to acquire a permit for all of these before you can go ahead with construction. This can lead weeks, possibly months of tedious waiting and may seriously extend the timeline of your commercial construction project. And if you’re looking to demolish an existing property before you go ahead with a new-build? Well, you’ll need to acquire a demolition permit too.

Luckily, like all good commercial construction companies, we’re happy to handle the acquisition of all necessary permits. All you need to do is sit back and relax, safe in the knowledge that Substrata has things covered. 

Renovation Disadvantages 

It may be quicker and cheaper, but renovating an existing property isn’t always a sunny walk in the park; if you aren’t careful, thunderclouds can start forming overhead shockingly quickly. Existing properties, particularly if they’re old, can be hiding an array of unexpected surprises (and not the nice kind). Lead, asbestos, termites, mold and more could be waiting behind any given wall or in any ceiling cavity. If you encounter any of these when taking to your property with hammers and picks, prepare to face significant costs and lengthy project delays.

With renovations, you’re also constrained by the limits of the property’s existing structure. You may be able to knock down walls, rewire and re-plumb (at cost), but you can never match the creative freedom and flexibility that comes with ground up construction.

Conclusion 

This isn’t what you’ll want to hear, but when it comes to the choice between renovation and ground up construction, there is no single right answer; there is only what’s right for you. You’ll need to weigh up your circumstances, financial situation, available time and your ability to accommodate for unforeseen circumstances (very important).

Ground up constructions require much more time, effort and dedication (your building contractors will be your best friends by the end of it), but they’re also an order of magnitude more flexible and potentially more lucrative to boot. Renovations, on the other hand, are more restrictive, but they’re also generally quicker and cheaper (barring any serious unexpected setbacks).

If you’re unsure which is right for you, get in touch! We’ll be happy to speak with you about your specific needs.