The growing trend of retrofitting older buildings

The growing trend of retrofitting older buildings

Friday, December 27, 2019 from Floor Covering Weekly

Like many other sectors of the economy, there has been healthy growth in building activity over the past decade. Spending on overall commercial and industrial structures overall has more than doubled since hitting their last recessionary low in 2011, while spending in the lodging category — the sector hit hardest during the recession — has more than tripled over this period. We might have seen even greater growth, but the construction labor shortage has made it difficult for the industry to keep up with growing demand for space.

However, in recent years, the construction industry has been devoting proportionately more effort to fixing up older buildings that building new ones. Over the past four decades, construction levels for nonresidential buildings had averaged 1.3 billion square feet annually according to information from Dodge Data and Analytics. In 2019, we built about 1.2 billion square feet of new buildings, and that’s the highest level of building activity over the past decade. So, even though we’re in the midst of one of the longest building cycles in our history, we likely won’t even have one year during this current cycle where construction levels matched the average that we had seen over the prior three decades.

Instead, a larger share of investment on buildings has been focused on fixing up older buildings. During the height of the building boom prior to the Great Recession, architecture firms were reporting that about a third of their revenue was derived from renovating, retrofitting or adding onto existing buildings according to information from The American Institute of Architects. By 2011, the share of investment in existing facilities had ballooned to 45 percent. That increase reflected that fewer new building projects were undertaken during the recession as space needs were increasingly deferred, or met by fixing up existing buildings. However, even as the building market recovered after 2011, architects continue to report that the share of resources devoted to existing building hasn’t budged, holding in the 45 percent range.

There are several reasons why fixing up older buildings has been crowding out new building construction. The U.S. population has been growing more slowly in recent years, and likewise, the number of employed workers in our economy has followed suit. With slower growth in new workers, there is less need to build new office buildings. With slower growth in the number of students entering our secondary schools and colleges, there is less need to build new educational facilities.

Additionally, though, our population and workforce is less mobile now than it has been historically. New construction is facilitated by a more mobile population; households move to new areas that are often more affordable and less densely populated, and with this population growth, stores and offices spring up, new schools need to be built, and health care facilities are required to serve this population. Without this population movement, existing facilities may well suffice.

The current focus on existing facilities provides a unique opportunity to update the aging national building stock. About a third of our nation’s commercial buildings were built before 1970. Structures built prior to the 1970’s oil embargo, when energy costs were much lower, were generally built to very different energy efficiency standards. By today’s standards, most of these buildings had inefficient heating and cooling systems. Many had insufficient insulation, low energy-efficient windows, and roofing and siding systems that did little to assist in the management of  heating and cooling of the building. Many of these structures have been retrofitted and upgraded in intervening years, but many haven’t. This means that as we increasingly renovate older buildings rather than tear them down and build new ones, these existing building can be retrofitted with technologies that can make them nearly as efficient as new construction, thereby producing a double benefit for our environment.

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