When there is an increase in the demand for office space, many developers focus on creating value by upgrading older, lower-quality buildings to meet the need. Existing buildings that look dated, are functionally obsolete or originally were designed for a different purpose often can be renovated less expensively and faster than possible through new construction. The buildings may be in excellent locations, with historical or architectural significance, and can generate significantly more revenue if they have a better position in the real estate market.

The first step is to determine where the building should fit in the area real estate market. Is it an A+ building or a B- building? The amount of money invested is related to the grade of the resulting building and, therefore, the amount of rent the building will be able to generate.

Before any decisions can be made, the building needs to be studied in depth. This requires, at the very least, the participation of architects and engineers. Much can be learned from studying original building drawings, if they are available. Reviewing past building permits received and maintenance records will provide information on what work has been done and when.

Careful study must be undertaken to learn what must be upgraded in an existing building. There is a separate section in the Massachusetts State Building Code devoted to this type of project, as there are significant differences compared to constructing a new building. Consider what might not be required but is desired to improve the safety of the building. For instance, although it might not be required to pressurize the egress stairs, it is generally considered an important safety feature. A recent fire in a Cambridge office building showed the critical role stair pressurization plays in building evacuations.

If the construction cost is greater than 30 percent of the assessed building value, the building is required by law to fully comply with accessibility requirements. Buildings in Massachusetts are subject to Massachusetts Architectural Access Board regulations and the Americans with Disabilities Act. An accessible entrance, bathrooms, stairs and elevators are a few things that must be incorporated to provide equal access.

Understanding how the building will be used is critical. Whether or not the floors are conducive to single tenant or multitenant use is a very important decision that will have an impact on the design of the mechanical and electrical systems. The location of the stairs and elevators play a large role in the layout of the floor. If excessive corridors are required to allow for proper egress of multiple tenants, the space will be less desirable. It makes sense to have an architect lay out different options to determine if the floor can efficiently be used for multiple tenants or if it would be better suited to a single tenant.

The quality of elevator service in a building has a huge impact on tenant satisfaction. New office buildings have high-tech elevator systems that decrease waiting times dramatically. In order to compete for tenants with newer buildings, elevator upgrades may offer a high rate of return on investment.

Safety First

Older office buildings often have stairs that do not comply with current building codes. They may have winders or inadequate railings, or may not be properly separated from office areas. Again, a careful code review must be done to determine what upgrades are required, but safety must be a prime consideration.

Bathrooms are another area critical to tenant satisfaction. Older bathrooms rarely meet new tenant requirements. Replacing fixtures with water-saving models with automatic operation is an excellent way to increase energy and water efficiency and reduce building operating costs. Older bathrooms rarely meet accessibility codes and it needs to be determined if the existing spaces can accommodate accessible stalls and maneuvering space. If the bathrooms cannot be enlarged, it could be possible to build a separate accessible bathroom near by.

First impressions count. There are a few areas where it is desirable to spend a little extra money on aesthetic changes. Building entries and lobbies fall under this category because they are strongly tied to the identity and branding of a building. Redesigning these areas can go a long way in changing the way people feel about the building.

The location of the building matters, too. If the building is in a busy area, there will be services nearby available to tenants. If not, a good way to attract tenants to a more isolated area is to provide some critical amenities such as food service, a convenience store, a fitness center, parking or even dry cleaning pick-up.

When examining the building’s structural system, determine if it has the necessary floor load capacity for a modern office building. Modern, open-plan offices require in-the-floor power and data feeds, so the structural slab must be able to accommodate coring. Additionally, if spending more than 50 percent of the assessed building value, you must undertake a seismic review.

Older buildings often have extremely inefficient heating, ventilation and air-conditioning (HVAC) systems. An HVAC upgrade can dramatically lower building operating costs.

Today’s wired tenants demand higher electrical service support than was the case when many older buildings were constructed. A review must be done of the electrical service to determine if it is adequate. In addition, many tenants require back-up generator power to preserve their data in the event of an emergency.

Once the building conditions have been fully studied, the next step is to outline a project scope and carefully evaluate the costs of design and construction versus the potential return on investment.

A two-tiered approach that evaluates the scope and costs of achieving a B+ building versus an A building could be taken. This would provide “what if” scenarios: If we spend this amount of dollars to upgrade the building, then we could achieve this amount of dollars per square foot in rent. By comparing two or three scenarios, you can make an educated decision about how to proceed with repositioning the building.

Upgrading a building can be a complex procedure. However, if current market demand and the location are right, a design “face-lift” can go a long way toward increasing the appeal and, ultimately, the value of a building.