Refurbishment or new build: how to decide

The owner of an ageing building has two fundamental options: modernise the existing asset or demolish and build anew. Either can be right — the question is which delivers more value per unit of capital invested.

What you need before the calculation

• The condition of the structure and the building's remaining service life.
• What the site allows under current planning constraints.
• How efficient the existing layouts are by contemporary standards.
• The cost of replacing engineering systems and the facade.
• The rental potential of the location under both scenarios.

Refurbishment tends to win when the structure is sound and the site is already built close to its permitted maximum: a new build would not add much area, but would require a full approvals cycle and a long period out of use.

A new build is justified when the existing layouts cannot be corrected, the floor-to-floor height cannot accommodate modern services, or the site permits significantly more volume. In that case the cost of bringing the old building up to market standard approaches the cost of a new one.

Scenarios should be compared not by the cost of works, but by the income uplift they produce.

A third option is worth considering: phased modernisation that keeps part of the asset operating. It produces a smaller one-off effect but does not switch off cash flow while the works are under way.