Unanticipated hurdles put Developer Craig Wagoner's The Lofts at Jordan Creek $400,000 over budget.
The Ups, Downs of Commercial Renovations
When it comes to buildings ripe for redevelopment, Springfield has plenty of offerings. The local landscape is dotted with businesses that revamped spaces that originally served other purposes, from lofts in former warehouses and a City Hall that had a former life as a post office and federal courthouse.
While the road to renovation can be punctuated with detours, unexpected costs and potholes, several area professionals say the trip can be worthwhile.
Developer Craig Wagoner has remodeled 10 buildings in Springfield during an eight-year period, including The Lofts at Jordan Creek at the intersection of National Avenue and Chestnut Expressway.
While many folks simply saw an eyesore, Wagoner, who loves older buildings for their history and character, saw a structurally sound building and investment opportunity.
He purchased the building six years ago and construction of the $9.5 million project is still ongoing. The Lofts at Jordan Creek now houses seven commercial ventures on the first floor, including a Heroes Coffee Co. and JMark Business Solutions Inc., as well as 33 residential lofts.
There is room for one more commercial tenant at the development when construction wraps up in January, Wagoner said.
“There’s so many surprises along the way,” he said.
For example, the wood flooring at The Lofts at Jordan Creek was in worse shape than Wagoner realized when his company began construction. As a result, more asbestos was found than anticipated, so there were additional costs to adding a concrete floor. Wood beams at the structure also had to be replaced with steel, and Wagoner said those changes sent the project over budget by about $400,000.
He said tax credits for redevelopment is a necessity for making extensive renovation projects financially viable. Wagoner received about $1.7 million in tax credits for the Jordan Creek project, and expects to receive more than $600,000 for his latest project at 213 W. Olive St., which will have 21 lofts, a parking garage and 2,000 square feet of retail space.
Ross Murray, vice president of R.B. Murray Co., a commercial real estate firm, said location and cost are driving factors for business owners trying to decide between new construction or renovation.
“If a doctor, for example, needs to be in the Medical Mile, there isn’t a lot of vacant land,” he said. “Likewise, if someone is trying to grow their business and needs to expand, but they don’t have the money to go from the ground up, retrofitting is often the best way.”
Other factors, including how solid a structure is, historical value and whether environmental remediation would be necessary, also should be considered when considering renovation, said Kit Carson, president of general contractor Carson-Mitchell Inc.
“If you have a 50-year-old building, one thing to take into consideration is the electrical and wiring you will need for today’s Internet and other technology,” he said. “When looking at the structure, does it have major storm damage? Can it be fixed? Does it have an unmatchable brick façade that would look horrible to try to patch?”
With older buildings, asbestos and lead paint removal are two of the most common environmental considerations, but additional cleanup could be necessary if the building’s previous use involved toxic chemicals, Carson said.
“If it is in a historical district, you can’t just do anything to it,” Carson said.
If a property is listed on National Register of Historic Places, owners may be eligible for certain preservation benefits and incentives, such as tax credits, too. The former Springfield Grocer Co. Warehouse, 323 N. Patton, is among a group of 14 buildings and districts nominated for inclusion on the list. That property is owned by Yellow Bonnet LLC, for which Wagoner is the organizer. Among the Springfield-area properties already on the register are the Abou Ben Adhem Shrine Mosque and Gillioz Theatre.
Often, the biggest challenge to renovations is getting clients to visualize results, said architect Chris Ball, president of Jack Ball & Associates Architects PC.
“Many of our clients ask us to do the visualization work before they purchase the property,” Ball said. “They want that visualization assurance.”
Ball points to Environmental Works Inc.’s office, 1455 E. Chestnut Expressway, formerly used by Cain’s Coffee and a Sara Lee Corp. distribution center.
Environmental Works owner Robin Melton bought the 30,000-square-foot building in 2008 for $1.5 million and spent another $500,000 on renovations, according to past Springfield Business Journal coverage.
“It had a bad office infill and was smelly. It took a lot of work to get the new owner to see what we could do with the space,” Ball said, noting that the building has since won several design awards.
Sometimes, business owners are quick to see the possibilities in an older structure.
Craig Hosmer, a partner with the law firm of Hosmer King & Royce, said his firm immediately saw the potential in the 1950s-era concrete building at 313 S. Glenstone Ave. The building was originally the offices for the Milking Shorthorn Cattleman’s Association and, more recently, Webb’s Wallpaper.
“It has lots of natural light and is structurally very strong,” Hosmer said of the building. The total cost of the building and renovations was about $880,000 for 5,500 square feet. That’s a cost Hosmer said the firm couldn’t have beat by building a new facility.
Murray said renovating a traditional office space today can cost anywhere from $10 a square foot to $35 a square foot, depending on whether the property needs spruced up or extensive renovations. New commercial construction, he said, can cost between $115 and $120 a square foot.
“Whether businesses should purchase or lease an existing building or build from the ground up is just a case-by-case basis,” Murray said. “It’s as individual as each business plan.” [[In-content Ad]]