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What To Know About Adaptive Reuse in Commercial Real Estate?

Are you a commercial real estate investor looking for innovative ways to maximize your property’s potential? One strategy gaining popularity is adaptive reuse, where a property is repurposed for a different use while retaining any historic structures or features of the original building.

For instance, an investor could transform an old church into a trendy restaurant, convert a school into a museum, or renovate a dilapidated factory into multifamily housing. Learn why adaptive reuse might be the key to unlocking your property’s maximum value.

Since the pandemic, multifamily construction projects have grown to meet the work-from-home demand. This trend has piqued interest in transforming office buildings into multifamily housing to keep up with consumers’ requests. Repurposing is also occurring in retail and office buildings. Here’s a closer look at adaptive reuse in each asset class.

Adaptive Reuse in Multifamily Properties

South Side on Lamar is a registered landmark that was once known in the Dallas commercial real estate market as the Sears Building. In 2000, developers converted it into a multifamily tower that spans 798,163 square feet, with ten floors, first-floor retail space, and 252 parking spaces. This multifamily development also shares a neighborhood with various restaurants and hotels, a movie theater, other residential properties, and Jack Evans Police Headquarters.

Adaptive Reuse in Retail Buildings

One example of adaptive reuse in retail buildings is architectural firm KTGY’s project Re-Habit. KTGY saw an increase in homelessness and retail stores closing and decided to combat both issues by providing a safe environment to live and sleep in. Re-Habit repurposes a vacant big-box store into a co-living area with retail spaces, resources for long-term self-sufficiency such as job training, sleeping pods, and dining halls.

Adaptive Reuse in Office Buildings

Older office buildings with multiple vacancies may need help attracting tenants if they lack nearby mass transportation or if the building requires a large amount of money for renovations. The modern-day workplace has changed from the cubicle setup to a more spacious layout, making warehouses and old factories great contenders for adaptive reuse.

Behr Paint Company recently did this in Santa Ana, CA, when they converted a 30-year-old commercial building into their headquarters. By the time the project was finished in 2018, 230,000 SF of existing space was renovated, combining five separate units to create their headquarters. This project also incorporated sustainability by reducing negative impacts and encouraging ideas that produced a positive environmental impact.

CRE investors planning to utilize adaptive reuse have a few factors to consider before purchasing a property. Researching these issues will prepare you to make the best-educated decision when choosing a CRE property for adaptive reuse.

Site Selection and Due Diligence

Like any other real estate endeavor, finding a prime location is an essential factor when selecting a property to repurpose. The success of your investment largely depends on where you decide to buy, so look for high-traffic areas with similar uses to yours. Once you find a location, you must perform due diligence, including assessing the design, engineering, land use, construction, finances, and more.

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