Revamp or rebuild?

Renovate it or knock it down and start over? Those are the choices an owner or developer faces with an older property that has outlived its usefulness, struggling to maintain its profitability.

Refurbishing almost always costs less, which makes it the tempting choice. But in the long run, demolishing a building or an entire development and starting anew can sometimes pay off. Retail Traffic magazine reported on this question, citing one example of a mall that attracted three-and-a-half times higher retail sales per square foot than it had before the property was completely rebuilt.

In some cases, rebuilding can actually be accomplished faster than refurbishing, which in itself can make up for part of the higher cost. Properties with unique characteristics or circumstances also may cost more to refurbish than the results are worth, again tipping the decision toward reconstruction.

Rebuilding from scratch is not without its challenges. The significantly higher initial cost can be difficult to overcome, even if projections show the investment will pay off over time. A rebuild project also may require governmental bodies to approve aspects of the endeavor. Still, going this route offers considerably more flexibility rather than trying to force-fit solutions into an existing configuration.

The decision isn’t always either/or. Sometimes, the best solution comes from a combination—rebuild part of a retail center, office complex, or mixed-use development and refurnish the rest. This approach can completely transform certain aspects of a property to help reposition it in the market while still modernizing other areas to increase the property’s overall appeal.

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