Build New or Renovate? A NY Expert Weighs In

posted on : January 22, 2025 0 Comment

By Adina Rogoz

As cities grow and evolve, so do challenges such as rising land costs, environmental concerns and the pressure to meet modern lifestyle needs. For real estate executives, these problems come down to one key question: Should you build from the ground up or revamp existing structures?

Building new brings the freedom of starting fresh and the ability to incorporate cutting-edge designs and meet the latest energy efficiency standards. However, it often comes with higher initial costs and longer timelines. Meanwhile, revamping existing properties can preserve historical charm, reduce waste and minimize disruptions to established communities—but it also means navigating the complexities of outdated infrastructure.

To unpack this complex topic, we reached out to Nick Sinatra, founder & CEO of Sinatra & Co. Real Estate, which owns and manages more than $700 million in real estate assets, including 5,000 multifamily units, most of which are located in the Northeast. Although the company focuses on acquisitions in core-plus markets, as well as residential development and management, it also invests heavily in urban infill and adaptive reuse projects.

What are the top factors that developers consider when deciding between building new or revamping an existing property?

Sinatra: It always comes down to the return on investment analysis. Then there’s capability—some firms don’t have the experience or stomach for an adaptive reuse. Putting a structure up based on a set of drawings is straightforward. Tearing into existing walls and building systems can be very challenging and provide many surprises. Additionally, most construction professionals can predict with a good degree of certainty how long a new build will take in a given market/location. That’s not always possible for renovations.

How does the timeline for revamping a building compare to a new build?

Sinatra: It really all depends. Sometimes renovations could be faster since you have walls, foundations, roofs etc., already in place. Sometimes there can be huge problems or unforeseen delays that take much longer than a new build. We typically build multifamily and mixed-use structures in 12 to 14 months—in addition to the entitlement timeframe.

What are the primary challenges associated with renovating an old building?

Sinatra: Surprises. When building new, an architect has a set of plans and the development team can go build it. With adaptive reuse, there can be unknown and unwanted problems behind walls and with other elements of the job that create unforeseen headaches—and costs.

In many cases, you cannot know for certain where items are located and what condition they are in until you physically get into the structure and, even then, something could be one way on a floor and then very different on another floor that was built years later or changed without plans or approvals years ago. Change orders tend to be more frequent with renovations versus new builds, especially with an inexperienced team.

What are the advantages of repurposing older buildings for modern use?

Sinatra: One of the advantages is marketability. Customers love the uniqueness and history that can sometimes be unlocked and celebrated when repurposing older, historic structures. Another advantage is community accolades. Most communities welcome the restoration and enhancement of noteworthy historic buildings versus knocking down and building new.

Lastly, uncovering, restoring and celebrating the craftsmanship of yesteryear. Many times, older structures were built with materials and techniques that would be cost-prohibitive in new construction. For example, we restored an office building in Buffalo, N.Y., that was completed in the late 1890s where the terrazzo floors were individually hand-installed one-inch tiles—they now look as beautiful as they did more than 125 years ago.

Tell us more about how Buffalo’s former Women and Children’s Hospital became Barton Apartments.

Sinatra: Developing buildings in Buffalo, one of our strengths is historic preservation. The conversion of the former Women and Children’s Hospital was certainly unique given the fact that it was a hospital—something we don’t typically associate with the word “historic.” When looking at the floorplans, we were able to effectively treat the former examination rooms and offices as essentially a framework for new apartment dwelling units.

The building has some wonderful exterior architectural detailing, but the inside certainly had the look and feel of a former hospital with linoleum flooring, interesting paint colors, etc. We were able to effectively work with the National Park Service to preserve any historic detailing with the plaster work while still modernizing the interior units and create a historic product that would still be attractive to the modern-day tenant base.

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Are there any regions or cities where one approach is more advantageous than the other?

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Sinatra: Some cities have been more focused over the last half-century on preventing the demolition of historic structures than others, so there is more supply to work with. For example, Charleston, S.C., has long been renowned for its rigorous preservation efforts, with ordinances dating back to the 1930s to protect its historic downtown. Similarly, cities like Savannah, Ga., have maintained their historic districts through strict zoning laws and the establishment of organizations like the Historic Savannah Foundation.

Another factor is economic incentives. Some cities and states offer economic incentives such as historic renovation tax credits to make the risks associated with the renovation projects more palatable for investment. For instance, Missouri offers a historic preservation tax credit that has spurred the redevelopment of countless buildings in cities like St. Louis and Kansas City, such as the renovation of the historic Union Station Hotel in St. Louis. Similarly, Maryland’s Sustainable Communities Tax Credit has encouraged developers to undertake large-scale projects like the redevelopment of the historic American Brewery building in Baltimore.

How do you expect urban development to evolve over the next decade?

Sinatra: It’s all about infill in the next decade. Land is scarce, and the opportunities will arise in a scattershot approach based on repurposing older buildings that have been vacated or have become inefficient or obsolete—think office to residential or enclosed malls into data centers or mixed-use. I predict more residential for sale and for rent, and more experiential real estate as people are still going to want to be in our urban cores for all the reasons we have wanted to for the past few hundred years.