Adaptive Reuse: A Growing Real Estate Trend

Across the US, adaptive reuse, or re-purposing of older real estate for new uses, is an accelerating trend. It’s gaining considerable traction in cities like Dallas-Fort Worth that are experiencing large population growth and an influx of workers drawn by new jobs. Other cities like Chicago and Los Angeles are seeing a revival of urban cores as workers and companies move back to city centers. As companies relocate and grow, and workers seek housing, both are finding adaptive reuse as an attractive and economically competitive alternative to new construction in the suburbs.

A recent study by the CCIM Institute and the Alabama Center for Real Estate found that adaptive reuse currently makes up only 1-2% of commercial real estate across the country. However, the study found that adaptive reuse is expected to double in the coming years. You can find a summary of the study in this article written by Madeline Fry of D Magazine.

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​We’ve summarized some of the main points from the study and article below:

  • The largest drivers of adaptive reuse are:

  • E-commerce – Online shopping is reducing demand for retail space and malls while last-mile distribution centers are gaining popularity

  • Cost of New Construction and Scarcity of Land – Demand for urban areas is increasing, driving developers to consider new uses for older assets

  • Re-Urbanization – Cities are searching for ways to take advantage of the renewed interest in urban cores to re-invigorate blighted areas and create new tax bases

  • It can be more affordable, and faster, to reuse existing commercial properties than build new; the study found that reuse can be 15% to 20% less costly

  • The main impediments to adaptive reuse include:

  • Local approval, permitting, and zoning processes and ordinances

  • Few metrics for understanding the economics of these projects

  • Investors’ and lenders’ difficulty in valuing and underwriting reuse projects

  • A lack of a clear definition for adaptive reuse projects

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