Can Junked Old Buildings Become Institutional-Grade CRE? CCIM Says Yes
The adaptation of obsolete commercial properties for new uses as institutional-grade product is going to be more important than ever in the coming years, according to a new report by commercial real estate educator CCIM.
“We predict that adaptive reuse projects will make up a greater percentage of investment activity than self-storage and other select non-core property types by 2023,” CCIM Institute Chief Economist K.C. Conway said. Conway wrote the "Adaptive Reuse: Turning Blight into Bright" report in partnership with the Alabama Center for Real Estate.
The report examines the coming new era of adaptive reuse, which is no longer just about repurposing historic properties in primary markets to entice millennials.
As uncertainty surrounding the extended trade war and how it could affect the price of new construction persists, the report posits adaptive reuse will be an attractive alternative for many developers and investors.
CCIM is doing more than predicting growth in adaptive reuse by publishing the report. The organization also aims to facilitate that growth.
“The commercial real estate industry’s understanding of this property segment isn’t keeping up with this growth," Conway said. "We are now helping to innovate a new data platform that will allow us to assign key indicators to the category, including dedicated vacancy and absorption numbers, as well as cap rates and IRR."
The report represents the first industry definition and detailed criteria to qualify a project as adaptive reuse, designed to serve all data capture and market metrics and analysis, according to CCIM.
The following projects and others are examined in the report: Michigan Central Station in Detroit; Liberty Hotel in Boston; Newbern Library near Birmingham, Alabama; The Crosstown Concourse in Memphis, Tennessee; the Grange Vertical Farm in Brooklyn; The Lucas in Boston; Los Angeles State Historic Park in Los Angeles; Stapleton Airport/Punch Bowl Social in Denver; the FedEx Distribution Facility near Dallas; and the Birmingham Rotary Trail in Birmingham.
The report also noted that widespread collaboration by local governments is critical to the continued growth of adaptive reuse as a property category, and that such projects can transform smaller communities, such as Newbern, Alabama, and Mesquite, Texas.
