Wisconsin Historical Society

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Ten Reasons to Buy and Restore a Historic Commercial Building

Ten Reasons to Buy and Restore a Historic Commercial Building | Wisconsin Historical Society

There are many reasons why you might want to buy and restore a historic commercial building. You may choose to operate your business in a historic building simply because you like the building’s architectural design and craftsmanship. But you might also look at an older building as an investment, because older buildings are often built with long-lasting materials and energy-efficient construction. Buying and preserving an older commercial building also allows you to benefit from, and contribute to, the well-being of your community. 

Consider the following top 10 reasons to buy and restore a historic commercial building.

Reason 1: A Good Long-Term Investment

Your purchase and rehabilitation of a historic commercial building could be an excellent long-term investment. Historic commercial buildings are well-built, energy efficient and often offer great flexibility in the reuse of space. Many older commercial buildings are located in downtown areas that are experiencing a revival as a shopping and tourist destination. The development of downtown residential units is also increasing in popularity throughout Wisconsin. If your building is listed individually on the National Register of Historic Places or is a contributing building in a historic district, your rehabilitation work could qualify for substantial federal and state tax credits.

Reason 2: Well-Built and Long-Lasting

Commercial buildings constructed in Wisconsin before 1940 are some of the best-built buildings that will ever exist. Many of the state’s historic commercial buildings have stood for over 100 years, and will last another 100 years with proper care and maintenance. The frame and masonry buildings constructed from the 19th to the mid-20th centuries were built using old-growth wood and quality craftsmanship. Lumber made of oak, fir, white pine, poplar and other native hardwoods was used for the structural support of these buildings as well as floors, ceilings and architectural details. Expert masons utilized brick and stone for exterior walls and decorative elements. These buildings often display interior plaster walls as well as materials such as pressed metal, terra cotta and structural glass.

Reason 3: Already Energy Efficient

Commercial buildings constructed before 1920 are some of Wisconsin’s most energy-efficient buildings. According to the U.S. Department of Energy, pre-1920 commercial buildings require less energy consumption per square foot than any other commercial buildings except those built since 2000. Historic commercial buildings were designed with many features that help reduce energy use: high ceilings, operable sash windows and thick walls of plaster, brick and wood framing. You can also retrofit these buildings with modern energy-saving features to lower your energy bills even further. Many of these retrofits—such as adding ceiling insulation, storm windows, and roof solar panels—can be done while preserving and maintaining the architectural character of your building.

Reason 4: Open Floor Space Permits Adaptive Reuse

The open floor space on the first and upper stories of many historic commercial buildings can be adaptively reused for your business or tenants. Commercial buildings constructed between 1860 and 1920 usually have an open floor design with minimal partitions. Often these spaces have a high floor-to-ceiling height and character-defining features such as wood floors, pressed metal ceilings, wood ceilings and plaster walls. These characteristics could allow you to keep your floor space open for retail space, add partial-height partition walls for offices or subdivide upper floor space for residential units. A rear or rooftop addition could also provide you with additional opportunities.

The rehabilitation of a historic building is often less costly than new construction. A historic commercial building also offers a quicker occupancy time than new construction. Because the building does not need to be constructed from the ground up, a historic building can often be placed in service quicker than a new building.

Reason 5:  Eligible for Historic Building Tax Credits

One way to increase your investment in a historic commercial building is through the use of federal and state tax credits for substantial rehabilitation projects. By rehabilitating your building in keeping with its architectural character, you can take a 20% federal tax credit against your income taxes. The state also provides an additional 20% credit towards the state income tax to supplement the federal credit. For example, if you complete a substantial and approved rehabilitation that costs $200,000, then you would receive a federal tax credit of $40,000 and a state tax credit of $40,000. These are credits against what you owe in taxes, not a reduction of your taxable income.

Reason 6: Eligible for Tax Breaks via an Easement Agreement

You might be able to add to your investment in a historic commercial building through an easement agreement. Basically, an easement is an agreement between a property owner and a qualified historical society, conservation group or government entity to maintain a property's historic character in exchange for certain tax breaks. You can receive tax benefits in the form of reduced income, estate or property taxes. The easement binds the owner and future owners to keeping the property in its present condition rather than using the property at its highest and best use. The value of an easement is the difference between a building’s existing use and its highest and best use.

For example, if you owned a two-story historic building in downtown Milwaukee, and the highest and best use allowed by zoning regulations was a ten-story building, then you would give up those development rights when you signed an easement agreement.

Reason 7: Part of Downtown Revitalization Efforts

Your historic commercial building could benefit from—and contribute to—your community’s downtown revitalization efforts. Historic buildings are attractive venues for cultural and commercial amenities, such as museums, theaters, restaurants, shops and libraries that enhance community life. Community efforts to preserve and adaptively reuse historic buildings tend to concentrate these attractions within close proximity to older neighborhoods. The historic commercial districts in many Wisconsin communities are becoming the preferred locations for many residents to work and live. The revitalization of historic downtowns has been established as public policy, and many local, state and federal programs are available to assist downtown property owners with revitalization efforts. Your community may offer low-interest loans, façade grants and other financial incentives to encourage investment in an older commercial building.

Reason 8: Protects Community Tax Investments

When you make efforts to preserve a historic building, you are making a commitment to protect taxpayers’ investments – including your own investments – in your community’s existing infrastructure and neighborhoods. It is far less costly for your community to use and maintain the existing infrastructure, such as roads, sidewalks, lights, water/sewer lines, schools and fire stations, than to expand development on the edge of your city. Community expansion requires new infrastructure projects, usually at the expense of existing neighborhoods.

Consider the impact of post-World War II sprawl on many Wisconsin communities. As cities expanded into suburbia, businesses vacated perfectly sound buildings to follow the out-migration. The domino effect promoted decay in existing neighborhoods, decreasing their property values. Today, municipalities are more attentive to taxpayers’ investments and have learned what countless studies have proved: the costs of sprawl surpass the corresponding tax revenue from the new development.

Reason 9: Creates Economic Benefits for Your Community

Your preserved historic building can help to attract visitors to your community – and the economic benefits of “heritage tourism.” In fact, one of the most rapidly growing segments of the tourism industry is heritage tourism, which focuses on historic areas and sites. Heritage tourists are those who wish to experience the places, artifacts and activities that authentically represent the stories and people of the past and present. A community that accentuates its particular historic character and identity attracts visitors seeking an experience they cannot find elsewhere. Studies have shown that heritage tourists tend to visit longer and spend more money than other types of tourists, bringing economic benefits to the merchants in the communities they visit.

Reason 10: Creates Jobs in Your Community

Whether your commercial building preservation project is a large rehabilitation contract or a small repair, your project helps to create work and income in your community. Although new construction is often viewed as an indication of economic health, the rehabilitation of existing buildings actually creates thousands of construction jobs annually. The National Parks Service estimates that every $55,000 spent on rehabilitation equates with one job. In fact, historic preservation creates more jobs for the dollar than new construction. In a typical new construction project, about half of the expenditures are for labor and half for materials. In a rehabilitation project, it is more typical that 60% to 70% of expenses will go toward labor costs. The money you spend on local labor for your rehabilitation project will stay in your community.

By restoring a commercial building in your community, you also reduce the waste that goes into your local landfill. Construction debris accounts for 25% of landfill material annually. The demolition of a 2,000 square-foot building results in an average of 230,000 pounds of waste.