Overview · What & why
A decision, before a calculation.
Renovation cost includes the work and the economic consequences of doing it. Vacating space, phasing around tenants and restoring services affect income and schedule. A cheaper construction plan may take longer, reducing receipts or increasing interest. Consider each consequence once in the appropriate cash-flow period.
A concrete example
80,000 SF at $10 annual rent and 75% occupancy generates $50K monthly base rent. Four months of full interruption represents $200K foregone rent relative to continuing that income, before any expense savings or financing costs.
What to remember
The renovation calendar belongs in the investment model.
Before using this in a project: Tenant relocation terms, work sequencing, affected area, interim operating costs and lender conditions.