Time for a refit?
Christina O'Neill is a veteran journalist who covers the Greater Boston real estate market.
Commercial buildings constructed during the building boom of the 1980s are showing their age. Whether it's energy conservation — a prime factor in refitting — or adapting to the changing needs of new industries and new tenants, or simply making the building more esthetically attractive in preparation for sale, Metrowest properties built before the dot-com era are now undergoing makeovers.
Economic cycles determine the demand for refits, and Massachusetts is in an up-cycle right now.
Demand for energy-efficient, workplace-friendly space in which to put the region's burgeoning workforce is accelerating the need to refurbish buildings that only 30 years ago, or even more recently, were state-of-the-art.
Examples in Metrowest abound, many of them in Marlborough due to its abundance of office parks and proximity to Interstates 290 and 495 — but also because of the exodus of large employers such as Fidelity Investments and Hewlett Packard in prior years. But as the economy has picked up, the vacant space is in the process of filling up.
There's the former Fidelity campus at 300 and 400 Puritan Way, purchased by TJX Cos. Inc. A building at 200 Donald Lynch Blvd. built in 2002, is getting a $14.5 million upgrade to house tenant Sandisk. A building at 130 Lizotte Drive, built in 1999 and sold last year for $11.8 million, saw upgrades to its common area and lobby.
In Westborough, eClinicalWorks is about to embark on a build-out of a property it just purchased from EMC Corp. It paid $21.2 million for the building, which had been empty since its construction in 2000, and reportedly expects to spend $30 million on the buildout.
The first priority in most refits today is energy conservation, with an emphasis on building sustainability. Not too many years ago, energy conservation was relegated to a low priority because the tenant paid the utility bills, not the landlord. Additionally, energy refits were regarded as deep-pocket projects for which the return on investment was uncertain.
But today, energy conservation has become closely tied with improved quality of life for the building's users. Natural light and good air quality have repeatedly been shown to reduce sick days. A 2014 report, Health Wellbeing and Productivity in Offices, authored by the World Green Building Council, noted that staff salaries and benefits constitute 90 percent of a business' operating costs, while energy costs come in at 1 percent, give or take a 10 percent margin of error.
That said, what's the cost — and return on investment — of an energy retrofit? A 2011 paper, titled “Retrofitting Commercial Real Estate: Current Trends and Challenges in Increasing Building Energy Efficiency,” developed at UCLA's Center for Climate Change Solutions for Matt Ellis, vice president of Carbon Services at CB Richard Ellis, sought to find out. The paper's authors surveyed 129 commercial building retrofit reports to explore financial trends and returns. They also surveyed organizations that performed energy-efficient retrofits, concentrating on insulation, lighting, HVAC and solar retrofit projects.
Their findings: The average U.S. commercial building has the potential to cut energy costs by about 22 percent through retrofits, particularly structures built prior to 1990.
Lighting is the least expensive retrofit; HVAC is the most expensive. But the researchers found that HVAC was a priority of the decision-makers, who expected a payback period between three and five years.
Then, there's the issue of natural light, which has been demonstrated to have both psychological and physiological benefits, such as improved mood and morale, and lower fatigue and eyestrain. Not all outside wall space can be opened up, but atriums and break rooms with an outside view can make a difference.
The cost of refitting is a fraction of the cost to build new, and in recent years, government incentives and energy audits have addressed the cost and taken the uncertainty out of embarking on a refit, with the payback being improved quality of life for both landlord and tenant. It's even better when the landlord is the tenant. n
WBJ Web Partners
Most Recent
Most Recent
0 Comments