When the time comes for the owner of a small business to purchase their own commercial building, one of the first concerns that arises is the following: Should we build from the ground up or should we simply buy and renovate? When deciding between renovating an existing commercial property or building a new one from the ground up, the following are some elements that should be taken into consideration.
In most cases, the cost of renovating is lower.
Due to the fact that the cost of land, materials, and labor has been increasing over the past several years, the cost of constructing a new commercial building is typically higher than the cost of purchasing an existing commercial building of a comparable size and renovating it. There are always going to be outliers, but in general, inflation in land and building expenditures will surpass what a person would pay to buy and restore a property. Overruns in costs and requests for alterations take place on new building projects at a higher rate of frequency than they do on commercial renovation projects.
In most cases, renovating a commercial property reduces construction time.
If you buy an existing structure and make some conventional upgrades to it, the time it takes to be able to occupy the space will be far less than if you built it from the ground up. In most cases, undertaking even large commercial renovations will result in a shorter amount of time spent on their completion.
In addition, there has been a shortage of some of the materials used in building. Over the course of the past year, we have become aware of numerous material shortages, some of which include sand for construction, timber, steel, specialty products and drywall. Even though they do not constitute an emergency, shortages can cause additional delays.
Commercial renovations does not preclude the possibility of personalization.
Even though remodeling a commercial building might not be the same as designing and constructing your commercial property from the ground up, many business owners give their properties a considerable facelift and add their own personal touches. The chance to adapt an existing commercial building to better fit our clients’ needs is one that many of them have taken advantage of, and some of them even prefer the concept of making their building a little less “cookie cutter.”
On the other hand, there are certain financial benefits to completing a new build commercial construction project…
The market for providing financing for freestanding buildings is extremely competitive. The majority of financial institutions, including banks, credit unions, and non-bank lenders, have an interest in these kinds of properties. This is due to the fact that the Small Business Administration provides loans for owner-occupied real estate that are appealing to both borrowers and lenders. You, as the borrower, have a lot of leverage when there are a lot of lenders interested in financing your business.
From a financial point of view, there are a few additional benefits to building anything from the ground up. A construction contingency, which is put in place by the lender, often adds a ten percent estimate to the total cost of the project. This serves as a way to hedge against cost overruns or change orders that may come up over the course of the construction process. With the use of this contingency, a borrower is able to finance additional costs, bringing both the borrower and the lender some much-needed peace of mind. Additionally, some lending institutions provide an interest reserve. The borrower is solely responsible for making payments on the interest of the loan for the majority of new construction projects. When a borrower has an interest reserve, interest-only payments can be factored into the overall cost of the project. This allows the borrower to avoid making any principal or interest payments on the loan until the project is finished and can be occupied.
You’ll have the ability to create a look with the new commercial construction project
The proprietor of the company has a greater degree of influence over the overall appearance and layout of the building when it is constructed from the ground up. Building something from the ground up could be the best option for you if you’re looking for something with a one-of-a-kind configuration, an amazing lobby, or both. Some franchise firms have requirements that can be fulfilled most effectively by completely custom-designed and constructed standalone structures. Other companies are interested in leasing their building so that they can use it as part of their marketing strategy. If you buy property in close proximity to a major thoroughfare, a unique design or unusual signage can act as a billboard for your company.
What about commercial property resale value?
The item’s potential market price should also be taken into consideration. When it comes time to sell the building, even though it was recently built and may be beneficial for your company, the layout of the building may not be suitable for other companies. When you sell the property, you may not be able to recoup the cost of the foreign marble that was used in the lobby or the fixtures that were installed in the executive washroom. When it comes time to sell, the price per square foot is typically more important than any of the other considerations.
Even if I could easily construct a spreadsheet that contrasts the two choices and delves deeply into the price disparities between them, it is essential to keep in mind that the majority of the time, the decision boils down to a matter of individual preference. The possibility of constructing a building according to your precise requirements, in which everything is gleaming and brand new, is frequently a significant motivator for proprietors of small businesses. In the event that no expense will be spared, new commercial construction is most likely to emerge victorious. In my experience, though, money is almost always a key consideration, and commercial remodeling is the option that is chosen the majority of the time. In any case, proprietors of small businesses who opt to buy the commercial property on which their company is located have a fantastic opportunity to amass money over the course of time, regardless of whether the property was built from the ground up or was renovated.
Now that you have decided between a new build project and commercial renovation, here are some helpful Tips to Consider Prior to Building a Commercial Project
GTA General Contractors has been a leading commercial general contractor in the Toronto/Greater Toronto Area (GTA) and throughout Ontario for more than 30 years, and we are able to design, manage, and construct your project from start to finish. GTA General Contractors is a full-service construction and commercial development company that also provides consultancy services, construction management, design/build services, general contracting, project management, and more. If you decide to work with GTA General Contractors, you will have unrestricted access to your project manager who will monitor the progress of your project until it is finished
