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ROI on Metal Roofing

Roi On  Roofing

Metal roofing is a great investment; it's just hard to quantify

Kansas State Building Copper RoofIt is a basic axiom of real estate investment that the increase in the investment of a property over time derives almost solely from the land, not the building. While the building adds value to the land, over time that value declines as the building deteriorates, becomes less functional or grows less desirable. The land's rise in value must offset the building's decline in value. That's a basic axiom that is borne out by the three most important rules of real estate: location, location, location. Square footage is not one of those rules.

Of course, you can increase the value of a building by improving it. In residential real estate, the trade publication, Remodeling magazine, publishes an annual "Cost vs. Value Report" that investigates the return on investment of various remodeling projects. The basic premise is how much value would you add to a home if you remodeled the kitchen, put on a room addition or replaced the roof. The returns vary by project, obviously, from a low of 48.5 percent of cost recouped on a sunroom addition to a high of 101.8 percent of cost recouped from a front entry door replacement. These returns are over a two-year period.

A roof replacement on a home returned 62.9 percent of the cost. The roof specified is an asphalt shingle one. There is no data available for the return on investment of a metal roof in either a residential or commercial project. For commercial real estate investors, municipalities, homeowners, appraisers, school boards, insurers and others interested in property values, there is nowhere they can turn to identify the intrinsic value of a metal roof.

"Appraisers recognize that a brick wainscoting or brick exterior is more valuable than a batten board siding," says Rob Haddock, founder of S-5!, Colorado Springs, Colo., and noted industry expert. "But they don't recognize that a metal roof that has three to five to six times the longevity of conventional asphalt shingles is any more valuable."

Chuck Howard, PE, president of Metal Roofing Consultants, Cary, N.C., and another industry expert says: "One of the problems we have in our industry is that value of the metal roof is not clearly defined. The value of flat roofs are. The value of shingle roofs are. It's going to be X amount of dollars per foot. You tell people, 'a fl at roof will be $6 per square foot and a metal roof will be $12 per square foot,' and they say they can't afford metal."

Howard goes on to say, "I don't know if any appraiser has the background knowledge to say anything other than a metal roof is going to be more expensive initially than a shingle roof or a modified bitumen roof or whatever it happens to be."

 

Initial Cost

 

And just like that, the conversation of value changes to a conversation on cost, because that's the hurdle metal roofing needs to overcome. Buyers balk at the initial cost. Of course, any measurement of return on investment needs to begin with the initial investment. Too high and the return is poor.

Even in the cost realm, metal roofing may not be presenting its strongest case. Howard works a lot with school districts and municipalities that evaluate the long-term costs of a project. He says: "In new construction, I think we won that battle several years ago. You can put a metal roof on for the same or less price than you can a fl at roof if they'll truly analyze it. Because we are eliminating the deck and insulation is cheaper. There's not a difference with commercial."

That giant caveat is the roof needs to be designed correctly. Too often, Howard and others argue, the metal roof is designed to work on a structure that will work with any roof and is consequently overdesigned for a metal roof. "Metal roofs have been around since 1932," he says. "It's hard to say this, but there is a lack of design information for the designers-the architects and engineers-to really help them design it properly. So what happens is everybody is overdesigning."

Too often, the municipal projects draw on estimates that are unrealistic, and the metal roofs get pulled out of the project to save money. Usually those estimates come from project pricing services that treat metal roofing similar to other roofing materials instead of a unique product that requires different engineering. "You're putting a pound and a half on instead of 10 pounds," says Howard. "That makes a difference."

 

Durability

 

The payoff-the return on investment-for metal roofing comes in the maintenance and durability of the product.

"People are not aware of the longevity of metal roofing," says Haddock. "That's why I pushed so hard to do this survey we did to document the real service life of a metal roof."

The survey Haddock refers to was sponsored by the Metal Construction Association and the ZAC Association. It analyzed low-slope, unpainted 55 percent Al-Zn coated steel standing seam roofing in a wide range of environments across the U.S. (Howard and Haddock both participated in the study.) The research concluded that the expected service life of such a roof constructed today can be expected to be in excess of 60 years. That value, the researchers argue, equals the assumed service life of the building, as described by USGBC's LEED v4 rating program.

"You have so many roof types out there that are 15- or 20-year roofs," says Haddock, "and everybody seems to recognize that, and they throw metal in the same category: that it's a 20-year roof. I guess that's a result of warranties. The fact of the matter is that other roof types are way more liberal with their warranties than we are. The service life is the warranted life."

If metal roofing were to warrant roofs to the same service life standard, the warranties likely would run to 60 years.

There are, of course, cost implications in the durability of metal roofing that affects its return on investment. Howard has built a career on trying to overcome the initial cost objections to metal roofs and he has developed a spreadsheet that compares the anticipated costs of a metal roof to a typical fl at roof. His analysis includes initial costs that show metal roofing coming in at about 30 percent higher. But over the 60 year life span of the building, the 20-year fl at roofs need to be replaced three times and have considerably higher maintenance costs. His analysis suggests that at the 20-year mark, the total cost for a metal roof would be 22 percent less than a fl at roof. At 40 years, it would be 60 percent less. And at 60 years, it would be 68 percent less.

The durability of a metal roof provides a significantly better return on investment than a typical fl at roof over the predictable service life of a building.

 

Maintenance

 

Durability is just one side of main elements affecting return on investment for metal roofs. Maintenance is the other. Research from Harvard's Joint Center for Housing Studies (JCHS) suggests that investments in maintenance can have a very high impact on the value of a property. Making sure the building doesn't deteriorate over time improves the return on investment. The JCHS research infers that for about every dollar spent on maintenance and repair, one gets a dollar in return.

"A metal roof, properly installed, requires no maintenance," says Haddock. "If you're not spending 4 to 6 cents per square foot per year on a built-up roof, you're shortening its life span. Coated steel does not require any significant maintenance. When we were doing the study, we got up on roofs that were 30 years old and nobody had ever been up there."

If you extrapolate the JCHS survey to metal roofs, you could suggest that zero investment in metal roofs has a return. In the commercial building market, metal roofing isn't treated like a brick façade or an addition, so we can't say it has its own intrinsic value that buyers demand. Because of that, documenting a return on investment is nearly impossible. There is, though, a return on the initial investment derived from its longevity and ease of maintenance.