When you’re talking about areas that are already very dense, then building up is the only rational way to go. (I’d prefer building down, but that’s more expensive.) I’ve seen facades preserved while higher, more modern buildings were built in the same footprint, and I think that’s a good compromise on “character” versus density. But when it comes to 2- and 3-flat buildings with fenced in yards, bulldoze 'em and put in high density.