The Real Value of Space - The Impact of Insulation Specifications on the ROI of Internal Floor Area and Roofing Retrofits
Posted: January 24, 2020 | Project Management
The usable space within a building is a fundamental metric in understanding the valuation, and also the investment potential, of real estate.
Properties with greater internal floor area command higher rents, in addition to higher overall financial values and, therefore, give rise to a greater Return on Investment (ROI).
As codes and regulations continue to target energy consumption and CO2 emissions, buildings are being subjected to increasingly higher energy performance standards. New codes may include requirements for the building envelope that can lead to an increase in the wall insulation thickness required to achieve the specified thermal performance and, therefore, a corresponding decrease in marketable internal floor area.
Increased Energy Performance Standards and Wall Thickness
Poorer performing insulation materials (those with a lower R-value per inch), can exacerbate the ever-diminishing indoor space, particularly in buildings limited by a fixed footprint. Over time, this can erode the financial value, thus investment potential, of a building.
However, premium performing insulation materials (i.e. those with a higher R-value per inch) can provide some relief, since a lower thermal conductivity can result in thinner insulation. A thinner insulation can result in thinner external wall construction, and an increased internal square footage.
With an R-value of 16 on two inches, Kingspan Kooltherm premium performance insulation has a higher R-value than any commonly used insulation. The width of external walls incorporating Kooltherm insulation is thinner than comparative solutions — providing internal space gains without increasing the overall designed footprint of a building.
Quantifying ROI of Premium Insulation in Walls
Kingspan commissioned Currie & Brown to investigate the “Real Value of Space in Commercial Real Estate”. They developed a research program to analyze a database of over 70,416 commercial buildings generated from a model that considered a range of physical and financial building characteristics, and analyzed several real case study buildings to compare to the calculation method used for the database buildings. The analysis considered both a range of building characteristics (e.g. size and shape) and a range of commercial variables (e.g. geographical location, rental value and material cost), that are representative of modern–day commercial buildings in the United States.
To establish the extent of this financial benefit on a given building, four types of external wall constructions were examined. These four scenarios vary in insulation thickness, type, and cost, dependent on the location of the case study. For each scenario, a comparison was made between two or more build-ups with different insulation specifications. The construction width and cost analysis for each build-up were used as direct inputs into the model.
The outputs from the model were evaluated to determine the Capital Expenditure (CapEx) investment “cost” of the additional space and, in terms of rental income and yield, the capitalized market “value” of the additional space. The ROI was thus calculated by dividing the latter by the former minus one.
Take the case study of a retail park in a primary location in Boston with development cost on an existing site at $66,135,866. It has a rentable area of 59,201 square feet with an external wall area of 19,913 square feet of brick-clad steel frame. To achieve the specified R-value of 19, it would require 5 inches of mineral wool insulation as opposed to 2.36 inches of Kingspan Kooltherm K12 Framing Board.
In this case, Kooltherm would save 2.64 inches on the wall thickness, and the thinner wall configuration would add 267.1 square feet of additional rentable space. The additional CapEx cost offset for Kingspan KoolthermK12 Framing Board versus mineral wool insulation would be $78,864, or 0.12% of total development cost. At a market rate of $55.73 per square foot, using Kooltherm insulation in this building would result in an additional $14,883 in annual rental income, with a capitalized value of additional space at $243,589 and a 209% return on additional CapEx investment.
In the case of a 14-story high office tower in Chicago with a rainscreen clad steel frame wall construction, by using Kingspan Kooltherm K15 Rainscreen Board with an additional CapEx investment of $458,226 (4.09% additional offset of total developmental cost) over mineral wool, an additional floor area of 1,660.1 square feet was gained. This resulted in an additional $62,553 in annual rental income, with a capitalized value of space at $1,068,292 and a 133% return on additional CapEx investment.
Findings show that the cost of specifying Kooltherm wall insulation, in lieu of the comparative solutions, can provide an overwhelming ROI. Using several wall construction types, 91.5% of the database buildings analyzed showed a positive ROI.
Total Project Cost Savings on Roofing Retrofits with Optim-R Vacuum Insulation Panels
New energy efficiency and carbon emission reduction legislation and codes affect the entire building envelope. Roofing retrofits of existing commercial buildings require a higher R-value, leading to the installation of thicker insulation. This can adversely affect the heights of door thresholds, parapets, hand railings, etc. leaving building owners with high retrofit costs. Kingspan OPTIM-R is a next-generation insulation comprising rigid vacuum insulation panels (VIP) with a microporous core, which is evacuated, encased and sealed in a thin, gas-tight envelope to give outstanding R-values and an ultra-thin insulation solution. The high level of thermal efficiency, combined with minimal thickness — up to R-28 on 1 inch and R-57 on 2 inches using calculated edge thermal resistance properties — provides an ideal solution for applications where a lack of construction space or depth is an issue, such as commercial roofing on single-ply low slope and IRMA systems.
One of New York’s largest and most prestigious universities needed to retrofit a 15-story student housing building built in 1987. Its roof and terraces needed to be brought up to code and waterproofed for leaks due to issues with door thresholds and parapets. The project required a fast completion time: between six and ten days.
Skyline Restoration and Superstructures Engineers + Architects worked with the university to update perimeter conditions of one of its student housing buildings using between 1,500 and 1,800 square feet of Kingspan OPTIM-R vacuum insulation panels.
“The existing roofing system’s insulation thickness was minimal and the doors and through-wall air conditioning units were very low,” explained Michael Stripunsky, Senior Associate, Superstructures Engineers + Architects. “The distance from the top of the existing concrete deck to the bottom of the air conditioning unit wall penetration was less than eight inches. If traditional insulation had been used, the top of the new roofing system would have been just at the level of the wall opening.”
OPTIM-R’s high level of thermal efficiency, combined with minimal thickness, made installation fast and easy because of its ultra-thin nature and its effectiveness for when space is tight. “In a case like this, using OPTIM-R was a cost effective and efficient solution. We saved the client money and time, and allowed for normal building operation,” remarked Stripunsky. “Using OPTIM-R also allowed us to avoid costly modifications to the existing perimeter conditions.”
The owner of a historic high-rise building on 5th Avenue in New York faced a challenge on the remodel of one of the roofs. In order to meet the required R-value, they would be dealing with the high costs associated with the thickness of the insulation.
“The biggest change was probably the railing details. In New York, you have to have your railing details a certain height. When they add additional insulation needed to meet the current code of R-30, the railings would be too shallow, which means you’re not compliant with regulations for railing details,” said Andrew Wilson, Commercial Manager with Kingspan, who worked with the building owner on the project.
Repairs to the roof’s terrace brought up additional issues. Three door entries led to the building’s terrace, and any new insulation added would raise the roof’s paver system. All of the door thresholds would then need to be raised, which meant contractors would need to address all flashing on the roof. “The biggest concern for the client,” said Wilson, “was that they would have to take the renters out of that building during the renovation because there was going to be heavy work done. Losing that space for six to nine months would be a huge loss of income.”
By selecting OPTIM-R, the client saved weeks in construction time and the insulation wouldn’t affect the railing details or raise the roof pavers — which would require replacing the flashing or thresholds of the doors. Tenants did not need to relocate while the insulation was installed. The total project cost savings was $1.2 million and saved over 3 months in construction time. Innovative insulation technology provides design solutions to provide outstanding performance, while requiring less thickness in various applications.