Sustainable Investments in Construction: Cost–Benefit Analysis Between Rehabilitation and New Building in Romania

Abstract

Sustainable investments in construction are essential for the development of communities and for reducing environmental impacts. This study analyzes two scenarios: rehabilitation of an existing building and construction of a new NZEB-compliant building, based on a life cycle cost–benefit analysis. The results show that both scenarios generate negative Net Present Values (NPVs) due to the social nature of the project, but the new NZEB building presents superior performance (NPV: USD –2.61 million vs. USD –3.05 million for rehabilitation) and lower operational costs (USD 1.49 million vs. USD 1.92 million over 30 years). Key financial indicators (IRR, CBR), sensitivity analysis, and discount rate variation support the conclusion that the NZEB scenario ensures greater economic resilience. This study highlights the relevance of extended LCCBA in guiding sustainable investment decisions in social infrastructure.

1. Introduction

In recent decades, the concept of sustainability has become a central element of urban and rural development policies, emphasizing energy efficiency, reducing the carbon footprint and optimizing costs during the entire construction life cycle [1,2]. As we know, sustainability has become a key pillar of urban and rural development, focusing on energy efficiency, carbon footprint reduction, and life cycle cost optimization. Sustainable investments in social infrastructure are essential not only for improving living standards but also for promoting equity, inclusion, and local economic development. Sustainable investments in social infrastructure are essential not only for promoting the living conditions of communities but also for the action of social equity, inclusion and local economic development [3,4,5,6].

Life cycle cost–benefit analysis (LCCBA) became a fundamental tool in the evaluation of investment projects, providing a holistic image of initial costs, operating costs, energy impact and long-term sustainability [7,8]. In the construction sector, this methodology helps to compare scenarios of rehabilitation versus new construction, allowing an objective establishment of investment decisions [9]. LCCBA offers a holistic framework to evaluate investment decisions by considering both economic performance and long-term sustainability. Particularly, the construction of Nearly Zero-Energy Buildings (NZEBs) is aligned with EU objectives related to greenhouse gas reduction and improved energy efficiency. In particular, the development of buildings with almost zero energy consumption (NZEB) represents a strategic objective of European policies regarding the reductions in greenhouse gas emissions and increases in energy efficiency [10,11]. The implementation of the NZEB standard in public and social infrastructures contributes both to reducing operational costs and to achieving the targets assumed as a result of the Paris Agreement and the 2030 Agenda for sustainable development [12,13].

Comparing rehabilitation versus new construction involves complex variables beyond direct costs, including building adaptability, resilience to climate change and social and environmental externalities. These aspects are especially relevant for social infrastructure targeting vulnerable populations.

The analysis of the decision between rehabilitation and new construction involves a complex evaluation, which takes into account not only the direct costs but also the economic and social externalities, the functional adaptability of the spaces, the resilience to climate change and the life cycle of the materials used [14,15,16]. Thus, a long-term approach becomes essential to ensure efficient and responsible investment.

In social infrastructure, these considerations become particularly relevant, since buildings intended for services for vulnerable people must meet high standards of accessibility, comfort and safety [17]. In addition, the integration of the principles of the circular economy and corporate social responsibility in the design and execution process of these buildings is essential to maximize the positive impact on the community [18].

The development of sustainable construction involves not only reducing the consumption of natural resources but also extending the lifespan of buildings, increasing energy autonomy, reducing operational expenses and improving the quality of the indoor environment. Studies show that investments in sustainable buildings, although they involve higher initial costs, are amortized over their lifetime through significant energy and maintenance savings [19,20].

Increasing the complexity of functional requirements for social buildings, required by national and international standards, necessitates implementations for modern and efficient solutions [21]. The choice between rehabilitation of an old building and building a new one has to be taken into account using rigorous economic analyses, which includes not only the initial investment but also the operating costs and maintenance in the long term [22].

In this context, life cycle cost–benefit analysis offers an integrated approach, which leads to informed and sustainable investment decisions and also ensures an efficient use of public resources [23]. Particularly, for rural or peri-urban social infrastructure, sustainable investments can become essential factors in reducing territorial dissipation and create resilient and prosperous communities [24].

To illustrate the growing academic interest in this topic, a literature search was conducted using the Web of Science (WOS) database. Figure 1 and Figure 2 show the evolution of scientific publications related to “cost–benefit analysis in construction” (2000–2024) and “NZEB buildings” (2010–2024). The results indicate a significant increase in academic interest in the concepts of “cost-benefit analysis in construction”, as shown in Figure 1, and “NZEB buildings”, as shown in Figure 2. More precisely, the data were extracted using the following main keywords, “cost–benefit analysis in construction” and “NZEB buildings”, applying annual publication filters to capture the evolution of academic interest over time.

This study proposes a comparative analysis between two investment scenarios: the rehabilitation of an existing building versus the construction of a new building conforming to the NZEB standard—applied to a social infrastructure project. By integrating a rigorous economic evaluation and a sensitivity analysis, this study will highlight the impact of the decision on total costs, operational sustainability and social performance over the life cycle.

Despite the extensive literature on energy efficiency and sustainable design, few studies perform a direct cost–benefit comparison between NZEB and rehabilitation in the context of social infrastructure in Eastern Europe. The obtained results offer concrete arguments in support of decisions orientated to sustainable constructions and efficiency of public investments with wide applicability in the current context of the transition to a green and resilient economy.

2. Materials and Methods

2.1. General Description of the Study

The present study applies a life cycle cost–benefit analysis (LCCBA) on a social infrastructure project with a “care and recovery center” function [25,26]. The objective is to provide specialized services for vulnerable people, including psychological therapies, speech therapy, physiotherapy and basic medical care. Two distinct investment scenarios are comparatively analyzed:

Scenario 1—Rehabilitation of an existing building (shown schematically in Figure 3): This involves the modernization of a building with outdated functionality, adapting the spaces and equipping them for social functions. This also involves the modernization of an old, functional structure, including re-compartmentalization and energy upgrades.

Scenario 2—Construction of a new NZEB building (shown schematically in Figure 4): This requires demolishing the existing structure and constructing a new building fully compliant with NZEB standards, optimized for the intended function.

The new building is designed on 4 levels (basement, ground floor, first floor, second floor), with a total floor area of 565 square meters and a subdivision, including therapy rooms, multipurpose room, library, administrative and technical spaces, as shown in Figure 4. In both scenarios, it is proposed to achieve the same built developed surface area with the same functions.

2.2. Rationale for Choosing the LCCBA Methodology

The LCCBA methodology was chosen due to its ability to integrate investment and operational costs while quantifying long-term social and economic benefits [27,28]. This approach is recommended by international guidelines for public projects and supported in the literature as an essential tool for sustainable investment decisions and aligns with EU and national funding frameworks. The LCCBA allows for the integrated assessment of financial performance and social impact, which are essential in the context of care infrastructures for vulnerable people, where benefits cannot be quantified solely in monetary terms [29].

2.3. Analyzed Scenarios

Scenario 1—Rehabilitation of the existing building

This scenario involves investments in consolidation; re-compartmentalization; bringing to minimum standards of safety, accessibility and energy efficiency. Costs are lower in the initial phase, but long-term operationalization is affected by the constructive and functional limitations of the existing structure. This also includes structural consolidation, compliance with current safety and accessibility standards, and moderate energy improvements. Adaptability to future needs is reduced, and energy consumption remains high [30].

Scenario 2—Building a new NZEB building

The scenario involves the realization of a new building, with functionality clearly adapted to the specific requirements of the beneficiaries. The project foresees the use of modern architectural solutions, high-performance insulation, optimal natural lighting, intelligent air-conditioning systems and sustainable materials. It also implements high-performance insulation, efficient HVAC systems, optimized natural lighting and sustainable materials. It ensures long-term functional adaptability and reduced operational costs. The building is divided into distinct functional areas, according to the architectural plans: therapy, assistance, recreational and administrative.

Both scenarios are assumed to have the same operational conditions, number of users, equipment functionality, and operating schedules.

2.4. Data, Assumptions and Parameters

The data used in the life cycle cost–benefit analysis were collected from the project’s technical–economic documentation, including the feasibility study, architectural plans and regulations in force for public investments in social infrastructure. Essential information on investment costs, operational costs and functional configuration of the spaces was extracted from official sources, validated and approved during the planning stages of the project [31]. For the comparative analysis between the two scenarios (rehabilitation and new construction), a reference period of 30 years was established, considered to be the estimated operational life of the building without major structural repairs. All financial values were expressed in US dollars (USD),

Table 1. Investment estimation by cost categories for both scenarios.

Cost Categories	Cost Value Scenario 1 (USD)	Cost Value Scenario 2 (USD)
Land acquisition and development	0	0
Providing the necessary utilities	0	0
Design and technical assistance	105,800.70	98,800.00
Basic investment	962,434.30	955,543.00
Site organization	17,500.00	17,500.00
Various and unexpected expenses	44,700.00	41,200.00
TOTAL cost (USD)	1,130,435.00	1,113,043.00

, and calculations were made in real terms, without inflation, to ensure comparability of the scenarios [32]. As for the social benefits, they were estimated based on the functional capacity of the building and the number of annual beneficiaries, applying an average annual growth rate of benefits of 2% [33].

All data were collected from a certified feasibility study approved in June 2025, based on technical plans and regulations in force. Cost estimations include design, construction, site organization and contingencies. The total estimated cost achieved in June 2025, for the rehabilitation of the existing building, is about USD 1,130,435, while the realization of a new NZEB compliant building implies a total investment cost of about USD 1,113,043.

Prices are derived from public procurement databases (SEAP/SICAP) and validated by an accredited cost estimator. All values are expressed in USD and refer to real 2025 prices, without inflation adjustment. The annual operation and maintenance costs were estimated at USD 27,500 for the rehabilitation scenario and USD 21,400 for the new-build scenario, reflecting higher operational efficiency in the case of the building designed with higher energy performance [34]. The estimates for social benefits were based on the functional capacity of the building, the number of annual beneficiaries and the value of social services provided, considering an average annual growth rate of benefits of 2%. By applying these assumptions, a unified framework of analysis has been ensured, allowing for an objective and rigorous assessment of the investment performance of each scenario over the lifetime of the project.

Social benefits were estimated based on building capacity and projected number of users, assuming a 2% annual increase in benefit value. Both scenarios assume the same space functionality and room distribution, identical technical and functional capacity and compliance with national Indoor Environmental Quality (IEQ) standards.

2.5. Calculation Formulae

(a) Net Present Value (NPV)

The Net Present Value (NPV) is calculated according to Relation (1), i.e., the inflation discount rate with Relation (2):

$$NPV=-C_0+\sum _{t=1}^n{\displaystyle \frac{C_t}{{\left(1+r\right)}^t}}$$

(1)

$$\mathrm{The}\mathrm{inflation}\mathrm{discount}\mathrm{rate}={\displaystyle \frac{1}{{(1+r)}^t}}$$

(2)

where:

-

t the operating period for which the calculation is made, maximum n = 30 years;

-

C_t is the updated discounted annual costs;

-

C₀ is the initial investment cost;

-

r is the 5% discount rate;

-

n is the estimated lifetime of the project (30 years).

(b) Internal Rate of Return (IRR)

The Internal Rate of Return (IRR) is defined as the discount rate r * that makes the Net Present Value (NPV) of a project equal to zero, according to Equation (3):

$$0=\sum _{t=1}^n{\displaystyle \frac{B_t-C_t}{{(1+r^{*})}^t}}-C_0$$

(3)

where:

-

B_t represents the updated discounted annual benefits

-

r * is the Internal Rate of Return, which is calculated with an iterative method to find the value for which NPV becomes 0.

(c) Cost–Benefit Ratio (CBR)

The cost–benefit ratio is expressed by Equation (4):

$$CBR={\displaystyle \frac{\sum _{t=1}^n\frac{B_t}{{(1+r)}^t}}{C_0+\sum _{t=1}^n\frac{C_t}{{(1+r)}^t}}}$$

(4)

3. Results

The life cycle economic analysis covers a period of 30 years for both scenarios, with a 5% discount rate used in line with European funding guidelines. The economic analysis for the two scenarios, namely the existing rehabilitated construction or a new construction, was carried out for a period of 30 years, using an inflation rate of 5%.

Table 2. Comparison of maintenance and operating costs for both scenarios.

Year (%)	Estimated Inflation Rate (%/Year)	Inflation Rate Index (%)	Total Maintenance and Operational Cost Rehabilitated Construction (USD)	Total Cost Maintenance and Operational New Construction (USD)
1	5	105.00	28,875.00	22,470.00
2	5	110.25	30,318.75	23,593.50
3	5	115.76	31,834.00	24,772.64
4	5	121.55	33,426.00	26,011.70
5	5	127.63	35,098.00	27,312.82
6	5	134.01	36,852.75	28,678.14
7	5	140.71	38,695,25	30,111.94
8	5	147.75	40,631.25	31,618.50
9	5	155.13	42,660.75	33,197.82
10	5	162.89	44.794.75	34,858.46
11	5	171.03	47,033.25	36,600.42
12	5	179.59	49,387.25	38,432.26
13	5	188.56	51,854.00	40,351.84
14	5	197.99	54,447.25	42,369.86
15	5	207.89	57,169.75	44,488.46
16	5	218.29	60,029.75	46,714.06
17	5	229.20	63,030.00	49,048.80
18	5	240.66	66,181.50	51,501.24
19	5	252.70	69,492.50	54,077.80
20	5	265.33	72,965.33	56,780.62
21	5	278.60	76,615.00	59,620.40
22	5	292.53	80,445.75	62,601.42
23	5	307.15	84,466.25	65,730.10
24	5	322.51	88,690.25	69,017.14
25	5	338.64	93,126.00	72,468.96
26	5	355,57	97,781.75	76,091.98
27	5	373.35	102,671.25	79,896.90
28	5	392.01	107,802.75	83,890.14
29	5	411.61	113,192.75	88,084.54
30	5	432.19	118,852.25	92,488.66
TOTAL cost (USD)			1,918,421.08	1,492,881.12

presents the evolution of the costs of maintenance and operation of the construction in the two scenarios, and the evolution of these costs is graphically represented in Figure 5. The costs are evaluated for the period June 2025.

3.1. Net Present Value (NPV) and Cost–Benefit Ratio (CBR)

To evaluate the economic efficiency of the two investment scenarios, key financial indicators were calculated, namely the Net Present Value (NPV) and the cost–benefit ratio (CBR), which reflect the relationship between benefits and costs updated over the project life cycle, being presented in

Table 3. Comparison of relevant economic indicators for both scenarios.

Scenario	Investment Cost (USD)	Total Operating Cost (USD)	NPV (USD)	RCB
Rehabilitation	1,130,435.00	1,918,421.08	−3,048,856.08	0
New building	1,113,043.00	1,492,881.12	−2,605,924.12	0

and graphically represented in Figure 6.

To estimate the discount rate, it was taken into account that it must reflect the financing requirement, at the level of risk assumed by the project. As the financing is carried out from socio-regional development projects, a cost of capital of 5% recommended in the financial analysis for projects financed from non-reimbursable European funds was used.

The results show that both options are not financially profitable (NPV < 0), but the new building scenario performs significantly better. The results highlight that Scenario 1—Rehabilitation presents a lower economic efficiency compared to the option of constructing a new building. Although the NPV value is negative for both scenarios, the difference is significant: USD—3,048,856.08 compared to USD—2,605,924.12. Also, the cost–benefit ratio is 0 in both scenarios, since the construction carried out being intended for social cases does not bring financial benefits.

These results reflect that the lower initial investment in the NZEB new-build scenario may become more cost-effective if the social benefits are higher or if the capacity utilization rate is to increase.

3.2. Internal Rate of Return (RIR)

The RIR calculation was performed using iterative numerical methods, presented in

Table 4. Comparison of the RIR indicator for both scenarios.

Scenario	RIR (Estimated) (%)
Rehabilitation	Non computable—NPV remains < 0 for all discounts rates 1.26%
New Building

.

The discount rate indicates that both projects are not financially profitable under the given conditions, but the scenario of a new construction is more advantageous. Even though below typical thresholds, the IRR indicates a comparatively higher financial robustness of the NZEB option.

3.3. Sensitivity Analysis

The sensitivity analysis conducted for both investment scenarios aims to identify the critical variables and to evaluate the degree of sensitivity of each project to changes in these variables. The results are summarized in

Table 5. Sensitivity analysis—NPV for different variations.

Scenario	Variation Operating Cost (%)	NPV (USD)
Rehabilitation	−10%	−3,353,741.69
	−10%	−2,743,970.47
New construction	+10%	–2,866,516.53
	+10%	–2,345,331.71

.

The critical variables considered in the analysis are as follows:

• Initial investment cost, as it is anticipated that deviations from the initially estimated amounts may occur. On one hand, certain cost savings could be achieved, but on the other hand, some acquisitions may turn out to be more expensive than originally planned.
• Operating and investment costs: these were varied by ±10% to assess their influence on the Net Present Value (NPV) of the projects.

The rehabilitation scenario has an initial investment of USD 1,130,435 and annual operating costs of USD 27,500. However, the NPV for this scenario remains negative in all variation combinations, reaching USD —3,048,856.08, indicating low long-term profitability due to high operating costs.

In contrast, the new-build scenario assumes an initial investment of USD 1,113,043.00 and annual operating costs of USD 21,400. Even though the NPV is negative, it is less negative compared to rehabilitation, reaching USD—2,605,924.12, suggesting better long-term financial performance due to lower operating costs.

3.4. NPV Analysis Based on Discount Rate

To provide a broader perspective on the impact of the discount rate on investment performance, an analysis of the Net Present Value (NPV) was performed according to a variable range of discount rates, ranging from (1 to 10%), which is presented in

Table 6. Analysis—NPV vs. discount rate (1–10%).

Discount Rate (%)	NPV Rehabilitation (USD)	NPV New Construction (USD)
1	2,723,287.00	2,352,571.00
5	1,955,435.00	1,755,043.00
10	1,564,897.00	1,451,134.00

and graphically represented in Figure 7. This approach allows for the identification of the sensitivity of investments to changes in the cost of capital and highlights the range in which projects can become financially viable.

4. Results and Discussion

4.1. Economic Results

The Rehabilitation Scenario has an initial investment of USD 1,130,435 and generates high long-term operational costs of USD 27,500. The NPV for this scenario remains negative in all variation combinations, reaching USD—3,048,856.08, suggesting low long-term profitability due to high operating costs. This reflects the fact that rehabilitation is not financially viable under current conditions, even with a reduction in investment costs.

In contrast, the New Construction Scenario assumes an initial investment of USD 1,113,043 and annual operating costs of USD 21,400. The NPV for this scenario, although negative, is less negative compared to rehabilitation, reaching USD—2,605,924.12. This suggests better long-term financial performance due to the reduced operating costs.

4.2. Sensitivity to Cost Changes

The rehabilitation scenario is much more sensitive to increasing operating costs, which makes the NPV much more negative when operating costs increase. For example, 10% variables for operating and investment costs cause the NPV to decrease significantly. Therefore, the Rehabilitation Scenario shows high sensitivity to increases in operating costs, leading to significantly worse NPV values. In contrast, the NZEB scenario demonstrates greater robustness under variable cost conditions.

In the case of new construction, although the NPV remains negative, this scenario is less influenced by variations in operating and investment costs compared to rehabilitation.

4.3. NPV Analysis Based on the Discount Rate

Variations in the discount rate (1–10%) significantly influence the NPV in both scenarios but especially in the rehabilitation scenario. As the discount rate increases, the NPV becomes more negative, suggesting that the return on investment deteriorates rapidly as the discount rate (i.e., risk and cost of capital) increases.

In the case of new construction, although the NPV is negative, it remains more stable compared to rehabilitation, indicating that the new construction scenario is more resistant to changes in the discount rate. Increasing the discount rate reduces the NPV in both scenarios. However, the decline is sharper for the rehabilitation option, indicating that its financial viability is more affected by risk and funding costs.

4.4. Recommendations for the Investment Decision

The new-build scenario offers better long-term financial performance due to lower operating costs and higher energy benefits. Although the higher initial investment is a significant factor, this is offset by long-term savings and the possibility of obtaining external financing or government subsidies.

Rehabilitation may be an option in conditions of lower initial costs but is not cost-effective in the long term due to the high operating costs and structural limitations of the existing building.

New construction is recommended, especially considering that it will serve social services for disadvantaged communities and that the higher energy performance will contribute to long-term sustainability. Even with higher initial costs, the project is more cost-effective in the long term compared to rehabilitation.

4.5. Boarder Considerations: Sustainability and Decision Making

Beyond economic indicators, investment decisions should consider cultural heritage value as some buildings may hold symbolic or historical relevance that favors rehabilitation.

As per environmental impact, demolishing older buildings can generate construction waste and embodied carbon emissions. When it comes to regulatory and social constraints, zoning, public resistance, or demolition bans may limit the feasibility of new construction.

4.6. Policy Recommendations

Based on the findings, we propose the following:

1.

Prioritize NZEB construction in peri-urban or rural areas where new land development is feasible;

2.

Integrate LCCBA into public investment frameworks to optimize funding allocations;

3.

Support rehabilitation only when justified by legal, heritage, or structural constraints;

4.

Consider combining NZEB construction with social outcome indicators to qualify for European or national funding support.

5. Conclusions

This study provides a comparative life cycle cost–benefit analysis of two investment scenarios for social infrastructure in Romania: the rehabilitation of an existing building versus the construction of a new Nearly Zero-Energy Building (NZEB). Both scenarios were evaluated using financial and economic indicators (NPV, IRR, CBR), supported by sensitivity analysis and varying discount rates.

The results show the following:

-

Although both scenarios result in negative NPVs (due to the non-commercial nature of the investment), the NZEB option performs better in terms of financial resilience and long-term operational savings;

-

The rehabilitation scenario is more sensitive to increases in operational costs and discount rates and lacks adaptability for future needs;

-

The NZEB scenario, despite requiring a comparable initial investment, offers greater energy efficiency, lower life cycle costs, and stronger sustainability performance.

Beyond numerical indicators, decision makers should consider non-financial factors such as environmental impacts, cultural heritage preservation, and regulatory constraints.

This study contributes to the limited body of literature comparing NZEB and rehabilitation options in the context of Eastern European social infrastructure. It provides practical insight for public authorities, planners, and funding institutions on how to integrate extended LCCBA in sustainable construction decision making.