Adaptive Reuse: The Next Really, Really, Really Big Thing?
The idea of restoring blighted, abandoned buildings to their former luster for a second life isn’t exactly new. But according to CCIM Institute Chief Economist K.C. Conway, adaptive reuse could end up being commercial real estate’s next major product category.
Conway partnered with the Alabama Center for Real Estate (ACRE) to release a report entitled “Adaptive Reuse: Turning Blight into Bright,” which focuses on first steps necessary to “redefine and quantify the adaptation of obsolete commercial properties for new uses as an institutional-grade product category.”
Why so much focus on making the old new? The CCIM points out that adaptive reuse is a good alternative for developers and investors wary of how an extended trade war could impact the price of new construction. To that end, “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,” Conway said. “But the commercial real estate industry’s understanding of this property segment isn’t keeping up with this growth.”
To that end, he went on to say that ACRE is creating a data platform to assign key indicators to the category of adaptive reuse, including dedicated vacancy and absorption numbers, cap rates and internal rates of return. “This will be an important next step in raising the product type to institutional grade, and helping it to go beyond equity capital, to attracting debt lenders.”
Pictured: Before and after, Birmingham Rotary Trail, Birmingham, AL
Credit: Goodwyn Mills Cawood
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