As the demand for apartments continues to rise nationwide, investors are looking to repurpose old office buildings and industrial properties for new uses. Reusing an existing building is generally a faster and less expensive way to create multifamily housing units, particularly in urban areas where construction space is scarce and pricey.
Adaptive reuse projects typically involve converting commercial spaces such as warehouses, factories and old office buildings into new residential uses. These conversions often include renovating the exterior, updating mechanical systems and reworking floor plans to suit a new occupancy. The repositioning of an existing building also provides added environmental benefits, since it reduces the amount of new materials required for a project. Also read https://www.mk1investments.com/we-buy-houses-california/
One of the most popular adaptive reuse projects involves converting old offices into apartment buildings, as many companies are moving to remote work policies and require significantly less office space than before. The trend is expected to continue for the foreseeable future, especially in downtown areas where office space is scarce and rents are high.
While converting an office into an apartment can be a complicated project, it is often a profitable and worthwhile endeavor. In the past year, more than 20,000 converted apartments hit the market nationwide, according to Yardi Matrix data. This represents the highest yearly total ever for these types of projects.
The popularity of these projects is being fueled in part by an overall need for more affordable housing, as well as concern about revitalizing historic downtown cores. In addition, reworking hotels into apartments is becoming increasingly common, as developers seek to fill the need for housing near airports and other transportation hubs.
Developers must carefully evaluate inbound migration and employment figures before pursuing an adaptive reuse project, as these factors can impact demand for the new apartments. In addition, they must look at the local political climate, as federal tax credits can be an important incentive for these projects.
For example, in 2022, Armada Hoffler REIT repurposed the former Dominion Energy headquarters in Richmond, Virginia, into a 174-unit multifamily building using historic tax credits. The REIT also transformed the Chronicle Mill, a former textile factory outside Charlotte, North Carolina, into a mixed-use development.
These projects have been successful largely because they offer residents a chance to live close to their places of employment, which is a major benefit for people working in tech, financial and medical fields. The proximity of these apartments also allows them to compete with newer, stick-built garden apartments farther from workplaces that may require a longer commute.
To successfully complete an adaptive reuse project, the investor must have a team with a variety of skill sets, including architects, engineers and designers who can help prepare the building for its new use, as well as lawyers, lenders and appraisers who understand the ins and outs of these deals. These teams need to have a shared vision of how the building can best be repositioned. The right team can increase the odds of success for these projects, making them a wise investment.
