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Investor Glossary
3 min read
by Jeff Hamann

Demolishing an Industrial Building

Demolishing an outdated industrial facility can be costly, depending on the size and location of the building or environmental factors.

In this article:
  1. Demolishing an Industrial Building
  2. How Much Does Demolishing an Industrial Property Cost?
  3. Size
  4. Location
  5. Debris Disposal
  6. Environment
  7. Related Questions
  8. Get Financing
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Demolishing an Industrial Building

Every commercial real estate property’s life eventually comes to an end, but in the industrial sector, building lifespans tend to be shorter than most. This is because of the large number of property characteristics that are essentially impossible to upgrade in the sector. Demand from industrial tenants has consistently led to newer buildings having wider column spacing and larger clear heights — and it’s very difficult, if not downright impossible, to retrofit yesterday’s structure to meet today’s needs.

As a result, industrial demolition may be something a developer is looking into as a way to reposition a land parcel in an industrial market. Consider that, according to a JLL report, the average age of an industrial building in the U.S. is 42 years old. With many of the most aged structures in older industrial hubs like New York, Chicago, and Pittsburgh, there is a real demand to demolish these assets to draw tenants who overwhelmingly seek modern industrial facilities.

How Much Does Demolishing an Industrial Property Cost?

While it’s certainly worth exploring the total replacement cost of an industrial building, the argument is generally moot if your asset is aged beyond the point of use for most of today’s tenant base. So, this section looks at the costs of actually demolishing the building itself.

Most experts provide an estimate of $4 to $8 per square foot to demolish a commercial real estate property. However, there are some factors to consider that may sway the cost of removing your building. These could include any or all of the following.

Size

While a price per square foot is useful to keep an eye on, larger buildings generally benefit from economies of scale. A 20,000-square-foot warehouse, for example, would certainly cost more on a per-square-foot basis to demolish than a 300,000-square-foot facility.

Location

Location can be important, especially in dense, tightly packed industrial parks or urban centers. Consider the intricacies involved in demolishing a small facility in an old neighborhood in New York or Chicago, compared to removing a small property in a wide, open area with no surrounding buildings. Location also can have significant impacts on labor and permitting costs, as well.

Debris Disposal

When a building is demolished, it leaves a lot behind: brick, concrete, metal, and so on. This will need to be removed as soon as the structure falls, so it is best to be aware of who will remove the debris and what costs could be involved.

Environment

Last but certainly not least, environmental concerns can require significant investment, even if this may not come until after a building is demolished. However, if your structure contains asbestos, that would need to be removed first — and that task alone can cost up to $2 to $3 per square foot.

Other factors like soil remediation could come into play, depending on your building’s history. Take a 60-year-old chemical plant, for example. Due to the nature of the building’s operations, it will certainly require an in-depth environmental review and may also require post-demolition soil remediation.

Being able to anticipate the costs associated with demolishing an aging industrial building is a critical component in understanding the total expenses involved in replacing it with a modern facility that meets today’s standards.

Related Questions

What are the steps involved in demolishing an industrial building?

The steps involved in demolishing an industrial building include:

  • Measuring the Building: For developers or investors who are set on demolishing a commercial building, the first step is to measure the building. Buildings can typically be measured traditionally, with a tape measure, however, for large projects, one may want to hire a surveyor to ensure that they can accurately plan and account for demolition costs. In addition, prior to demolition, a building needs to be professionally inspected for asbestos and other potentially toxic environmental contaminants. Source
  • Asbestos/Radon Inspection and Removal: If asbestos are discovered, a developer must call a specialized asbestos removal contractor, who will need to remove the material in compliance with EPA guidelines. Removal generally costs about $3/sq. ft., though this can vary significantly based on a variety of factors. In some areas, developers may also need to test for high levels of radon prior to demolition. If dangerous levels are found, certain safety measures must be put into place. Source
  • Selecting a Demolition Contractor: Just like any costly construction-related service, owners/developers should generally solicit bids from several contractors in order to see which companies offer the highest levels of service at the lowest price. Developers should also make sure that any bid is broken down by specific costs (i.e. labor, equipment, etc.) so that they do not overpay. In addition, demolition services often need to be licensed by a state, county, or city authority, and (like general contractors) should also be bonded and insured. Owner/developers should be careful to determine whether a demolition service includes permit and site cleanup costs. Source
  • Obtaining Demolition Permits: Perhaps most importantly, an owner or developer will need to obtain the proper permits before attempting the demolition of a commercial property. While this expensive is often covered by a demolition contractor, this is not always the case. Typically, demolition permits cost no more than a few hundred dollars, but in some places they can be quite expensive. In fact, in certain areas that attempt to discourage demolition in favor of property rehabilitation, permit fees can rise as high as $10,000. Source
  • Site Cleanup: Site cleanup is an essential part of the demolition process, since, if a site remains covered in debris, a developer will not be able to begin their new project. As previously mentioned, demolition services often include site cleanup costs, but this is not always the case. Source

What are the safety considerations for demolishing an industrial building?

Safety is a major consideration when demolishing an industrial building. It is important to hire a demolition contractor who is licensed, bonded, and insured, and to make sure that the contractor is aware of any potential hazards, such as asbestos or radon. The contractor should also be familiar with the local regulations and obtain the necessary permits before beginning the demolition process. In addition, the contractor should take steps to ensure the safety of workers and the public, such as erecting barriers and using dust suppression systems. Finally, the contractor should be prepared to handle any hazardous materials that may be present on the site.

Sources:

  • Demolition Costs in Commercial Real Estate

What are the environmental considerations for demolishing an industrial building?

Environmental considerations for demolishing an industrial building include measuring the building, asbestos/radon inspection and removal, selecting a demolition contractor, obtaining demolition permits, and site cleanup.

Measuring the building is important to accurately plan and account for demolition costs. Prior to demolition, a building needs to be professionally inspected for asbestos and other potentially toxic environmental contaminants. If asbestos are discovered, a developer must call a specialized asbestos removal contractor, who will need to remove the material in compliance with EPA guidelines. Removal generally costs about $3/sq. ft., though this can vary significantly based on a variety of factors. In some areas, developers may also need to test for high levels of radon prior to demolition. If dangerous levels are found, certain safety measures must be put into place.

Selecting a demolition contractor is also important. Just like any costly construction-related service, owners/developers should generally solicit bids from several contractors in order to see which companies offer the highest levels of service at the lowest price. Developers should also make sure that any bid is broken down by specific costs (i.e. labor, equipment, etc.) so that they do not overpay. In addition, demolition services often need to be licensed by a state, county, or city authority, and (like general contractors) should also be bonded and insured. Owner/developers should be careful to determine whether a demolition service includes permit and site cleanup costs.

Obtaining demolition permits is also important. Typically, demolition permits cost no more than a few hundred dollars, but in some places they can be quite expensive. In fact, in certain areas that attempt to discourage demolition in favor of property rehabilitation, permit fees can rise as high as $10,000.

Finally, site cleanup is an essential part of the demolition process, since, if a site remains covered in debris, a developer will not be able to begin their new project. As previously mentioned, demolition services often include permit and site cleanup costs, but this is not always the case.

What are the costs associated with demolishing an industrial building?

The cost of demolishing an industrial building depends on the size of the building and the complexity of the demolition process. Generally, the cost of demolishing an industrial building is between $4 and $8 per square foot, with the average cost of demolishing a 5,000 square foot building being around $30,500. However, for larger buildings, the cost per square foot may be slightly lower. It's important to note that the cost of demolition also includes the cost of obtaining permits, asbestos/radon inspection and removal, and site cleanup.

For more information, please see this article.

What are the legal requirements for demolishing an industrial building?

In order to demolish an industrial building, you will need to obtain the proper permits from your state, county, or city authority. Additionally, you will need to hire a specialized asbestos removal contractor if asbestos is discovered in the building. This removal must be done in compliance with EPA guidelines. You will also need to hire a demolition contractor who is licensed, bonded, and insured. Finally, you will need to factor in the cost of site cleanup, which is an essential part of the demolition process.

Sources:

  • Demolition Costs in Commercial Real Estate
  • Commercial Construction Loans
  • Interest-Only Loans

What are the best practices for demolishing an industrial building?

The best practices for demolishing an industrial building include:

  • Measuring the building and hiring a surveyor for large projects
  • Asbestos/radon inspection and removal
  • Selecting a demolition contractor and making sure they are licensed, bonded, and insured
  • Obtaining demolition permits, which can be expensive in certain areas
  • Site cleanup, which is essential for beginning a new project

For more information, please see Demolition Costs in Commercial Real Estate.

In this article:
  1. Demolishing an Industrial Building
  2. How Much Does Demolishing an Industrial Property Cost?
  3. Size
  4. Location
  5. Debris Disposal
  6. Environment
  7. Related Questions
  8. Get Financing

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