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To renovate or to build—and where to begin

To renovate or to build—and where to begin

February 27, 2017

All signals point toward a healthy economy and increased GDP in 2017 and following years, and the 7 Rivers Region is poised to follow suit. As local business owners and entrepreneurs look ahead to expanding their operations in the next year, space will be a primary consideration.

Whether for warehousing, production facilities, offices, services or even housing to accommodate our changing demographics, the first question is whether to renovate existing or build a new space and in whatever case, where to begin.

Renovate or Build?

When deciding whether to renovate or build, you’ll want to consider these five key areas.

Functionality.  How far off base is your current facility from meeting your needs and the needs of your clients? If the chasm is vast and costly to overcome, a fresh start with a new build might be in order. But if the existing building is functional and just needs a few updates, a renovation may be sufficient.

Technology. Technology changes at a breakneck pace. From your IT needs and computers to videoconferencing capability and automation, does your current space allow for current and emerging technology?

Physical facilities. What is the condition of essentials like the plumbing and HVAC equipment, electrical service gear, the roof, windows and lighting? You can often save by reusing and/or expanding these key building systems within a renovation. But if they are due for replacement anyway, new construction might be a better investment.

Efficiency. Old buildings can be costly to operate due to high energy costs, while new construction features give much more consideration to energy efficiency. In addition, the internal workflow evolves as your business changes and grows. Can you improve employee efficiencies in your current space?

Health and Safety Concerns. Carefully review considerations like indoor air quality and ventilation, sprinkler systems and fire alarms, electrical systems, security and accessibility standards. If these issues are not up to current code, renovation to address these can add up quickly. New construction will consider these issues from the start.

Where to begin?

Whether renovating or building anew, the first step in making it happen is developing your concept and selecting your project team. Select professionals who have experience building or remodeling the type of facility you want. Request several references, check online ratings and ensure your candidates have appropriate licensing and insurance along with a solid safety record.

This is the time when you will need to choose your project delivery method. In the past, businesses traditionally selected an architect to develop plans and specifications and then had their projects bid out by construction companies—a process called design-bid-build. But a newer method, design-build, is now more commonplace, accounting for 50 percent of all projects, compared with 40 percent for design-bid-build and 10 percent for construction management at-risk (where a construction manager guarantees to deliver a project at a guaranteed maximum price). Design-build calls for upfront collaboration between the architect and contractor that several studies show saves money, results in fewer change orders, establishes a single point of responsibility for the owner and allows construction phases to overlap for faster completion.

If you decide to go with the latter, this is the time to select your design-build team. If you prefer the traditional method, you need only select your architect at this point, and you can select your construction firm after step #2.

#1 Due diligence homework. Whether the renovation of an existing facility or a new build, several due diligence activities will help prevent unforeseen surprises prior to investing significant funds into your potential project. A Phase 1 Environmental Survey will identify any hazardous materials present within your existing facility or within the site of your new build. A Geotechnical Survey will identify unsuitable soils within your site if you are planning a facility expansion or a new build. Finally, a preliminary code study will help ensure your project vision will be in compliance with federal, state and local codes and ordinances. If you select a design-build approach, your contractor will manage the due diligence for you.

#2 Develop plans and establish project cost. The team you choose will work closely with you to translate your vision into plans that show layout, appearance, equipment and amenities. Your finished plans will include everything from construction details to finish materials to plumbing and electrical systems.

If you choose a traditional design-bid-build delivery, you’ll begin with preliminary drawings and advance to detailed drawings to obtain construction bids.

If you choose a design-build delivery, the design and construction team members will work concurrently on preliminary drawings and pricing, so you’ll know the project cost when preliminary drawings are complete. More detailed drawings will follow.

#3 Secure financing. Many businesses begin with a construction loan to cover cost of construction, interest and soft costs accrued during the construction duration. Construction loans are considered short-term to last the duration of construction, at which point businesses will turn to long-term financing.

Generally, loans are structured so that lenders provide 75 to 80 percent of the final cost. They prefer low-risk projects and will evaluate your ability to service the loan commitment along with the viability of your project. In addition to cost, they will want to see your design, site description, environmental study, feasibility study and projected return on investment. Once the construction loan is in place, you will need to keep your lender informed about progress and any major changes to the plan.

#4 Begin construction. The first step prior to construction commencement will be obtaining all the applicable building permits and project approvals with state and local agencies. Along with submitting required permit applications and project plans, you may also be required to provide engineering and calculations specific to the planned site and building improvements. You also need to be sure that required insurance coverages are in place for yourself and your contractor. With those hurdles cleared, schedule your ground-breaking and let construction begin.

Article by Chris Walters, president of DBS Group LLC. Reprinted with permission from River Valley Business Report.