Four Strategies for Adaptive Reuse Success
As questions persist as to what will become of the plethora of underutilized or obsolete commercial real estate assets, it always seems to come back to the same answer: adaptive reuse.
Repurposing and repositioning properties for updated market needs is proving to be a core focus for industry insiders moving forward post-pandemic. While the opportunities are considerable, the risks may be as well.
Here are four key strategies we have found to help ensure a successful outcome for adaptive reuse projects.
1. Great location.
Rule number one in real estate continues to revolve around location. While many tend to disregard entire swaths of asset classes such as office or retail, it’s critical to look beyond the obvious and current use and see the possibilities. For example, as several big-box retail chains are located at prime, “main and main” locations, they are intrinsically attractive possibilities for mixed-use projects. Finding the “wrong” project in the “right” market is key to optimizing the chances for a successful outcome.
2. Work with local, experienced partners.
There are several challenges when a developer converts a structure into something other than its original intended use. Ensure that the contractors and developers have experience working on adaptive reuse and are aware of the unexpected twists and turns that these projects can take. They also can provide invaluable insight into the local market and its approvals processes, saving you valuable time and money.
3. Budget for legacy challenges.
Make sure you budget for unanticipated surprises along the way. When dealing with older, prior-use building, it’s never known what’s truly involved until renovations commence. These include updating legacy heating, plumbing and electrical systems, removal of environmentally unfriendly materials such as asbestos or redesigning the placement of windows or electrical outlets.
4. Ensure your tax credits are in place.
As many of these projects are financed with tax credits, make sure that these subsidies are already in place and usable before commencing work. There are historic tax credits and state-sponsored tax credit programs for older buildings. It is an arduous process as it takes years to gain approvals with no guarantees of acceptance. These tax credit programs are often very specific to a particular geographic region or municipality.
At the end of the day, it’s the projects that have strong sponsorship, a supportable and comprehensive business plan, and an ability to execute on that plan that will enjoy successful outcomes of their adaptive reuse projects.