Insights

News & views of the industry we love

Pros & Cons of Ground Up Development vs. Redevelopment

  

Although ground up development and redevelopment are two different processes, both aim to achieve the same outcome: to transform a piece of land that a tenant can occupy. Ground up developments and redevelopments alike benefit their communities by attracting new business to an area.

 

Let’s take a look at the difference between ground up development and redevelopment and examine their pros and cons. 

 

Ground Up Development 

 

Ground up construction projects are an exciting route to take because they offer a lot of flexibility and can be tailored to meet the needs of the end user. From buying the land to producing a structure, developers see these projects from beginning to end. 

 

Pros

 

  • Ground up developments offer maximum flexibility because they can be designed completely to meet the needs of the end user. An owner user can build their dream office or a developer can build to the exact specifications for a tenant. 
  • Advances in materials can provide sustainable value and require less maintenance over a lifespan of a property. Solar energy is a great example of a technological advancement that saves tenants money, but sometimes these solutions can be as simple as maximizing natural light through the use of window panels to save money on electricity. 
  • Ground up development can be a very lucrative type of investment if planned accordingly. The tenant and developer can collaborate to bring something entirely new to the area and ultimately help enhance a community. 
  • There is less construction risk involved compared to redevelopment, which can involve hidden costs. Site investigation on a redevelopment can reveal issue after issue, which could become financially overwhelming. 

 

Cons 

 

  • Ground up development will, in most cases, take longer than redevelopment. The process involves more steps, resulting in a longer time frame from beginning to end. Those involved in ground up development will need to perform extensive due diligence and obtain permits before they can even start construction. 
  • It is generally more expensive because you aren’t able to reuse materials and the building needs to be built up to current code. Cities require new construction projects to comply with up-to-date code, something redevelopments don't always have to adhere to. 
  • Ground up construction is dependent on the season and weather conditions. Rain, snow, and wind can come unexpectedly and cause delays and even damage. The project timeline will need to be planned accordingly, and weather delays should be carefully thought out. 
  • It can come with financing challenges and potential risk because it comes with pre-development steps where project sponsors require out-of-pocket expenses to cover due diligence and permitting. 

 

Redevelopment 

 

Redevelopment is the repurposing of a site that was already developed. It can help to revitalize a community’s economy and add value to the property. Typically, redevelopment begins with assessing the current condition of the structure and the potential redeveloped use case of the building. 

 

Pros 

 

  • Redevelopment is generally considered less expensive than ground up because there is less construction cost since parts of the sitework and building structure will be reused. It also takes less time to make improvements compared to starting from scratch. Redevelopment will usually keep a portion of the original development, such as parking lots, plumbing, or building structure and add new elements to revive the property. 
  • A redeveloped property increases in value and drives the demand for business in its area. Redevelopment is all about replacing a worn out property with something new and fresh. One redevelopment can attract new business to an area and pave the way for others in the community. 
  • The sustainability of a property increases through redevelopment because materials are being repurposed. Pavements could be saved and tree clearing may not be needed, resulting in an increase on the property’s overall sustainability. 
  • The approval process for redevelopment can be expedited as cities tend to favor redevelopment, especially if the redevelopment is located in an urban or blighted area. The city does this because they assume the redeveloped business will help beautify the area and generate an increase in tax dollars. 

 

Cons 

 

  • Redevelopments may not be able to be customized the way ground up developments are due to having to work with the structure and lot size. A developer will have to work with the existing building structure instead of having a blank slate. 
  • It may not always be the most profitable solution. Structural issues could be uncovered after demolition and more work could have to go into bringing the property back to a habitable condition. Zoning codes might also have expired or need to be updated and the property could require a significant amount of technological upgrades depending on how old it is. 
  • A property might not be able to be redeveloped into what the developer and tenant are looking to accomplish. The property could be functionally obsolete and lack the capabilities the tenant requires to run their business. The best option is sometimes to demolish and start over.
  • Properties can sometimes be registered as historic or culturally significant and limit the redevelopment possibilities. Historic properties require preservation and keeping the original structure and finishings for as long as possible. A redevelopment could be stopped or halted if a building is determined historic. 

The choice between ground up or redevelopment is always based on the qualities and potential of a property. Be prepared to analyze multiple factors before making a decision as your choice will create a lasting impact. Doing your own research can be time-consuming and confusing. Working with an experienced preferred developer who is equipped to handle a variety of different projects is your safest route. Click here for more info on our development experience. 


Byline_Jeff-Carpenter-01

JEFF CARPENTER >

Partner

As a Partner at SimonCRE, Jeff Carpenter is responsible for sourcing opportunities in both ground up development and through the acquisition of value add assets. Jeff has successfully completed projects across the country and has been an integral part of the exponential growth SimonCRE has experienced since he joined.

 

Redevelopment New Development Commercial Real Estate Development Trends Construction Trends Commercial Real Estate Development Commercial Real Estate Development Process Site Selection Commercial Real Estate Development Planning Site Investigation Buyer Ground Up Development adaptive reuse