{"id":1004580996,"date":"2022-05-18T08:38:35","date_gmt":"2022-05-18T16:38:35","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004580996"},"modified":"2023-01-27T09:05:19","modified_gmt":"2023-01-27T17:05:19","slug":"finding-the-right-match-for-cre-conversion-projects","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/finding-the-right-match-for-cre-conversion-projects\/","title":{"rendered":"Identifying the Right CRE Properties for Conversion"},"content":{"rendered":"
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Mark Coe<\/p><\/div>\n

With swaths of vacant space in office buildings and other commercial properties now viewed as obsolete in the eyes of today\u2019s tenants\u2014a trend that, like many others, predates the pandemic but was accelerated by it\u2014there\u2019s been quite a bit of conversation around how these empty or nearly empty buildings can be repurposed.<\/p>\n

As a commercial construction firm well-versed in conversion and new-build projects alike, we know the reality is nearly any property or space can be converted to almost any allowed use with sufficient planning and budget, but there are some scenarios that make more sense than others, especially in the current environment.<\/p>\n

Three of CRE\u2019s hottest sectors\u2014health care, life sciences and residential\u2014are driving the conversion trend, allowing developers to realize not only time and cost savings but also environmental benefits unique to redevelopments. Yet even the strongest candidates for a retrofit present risk, namely in the form of unexpected issues that might arise during construction. Following is an overview of the pros and cons to weigh when considering a conversion, a rundown of property types that are best suited for new uses and important construction considerations that can make or break a project.<\/p>\n

Weighing the Pros and Cons<\/em><\/strong><\/h2>\n

Looking at conversions broadly, there are a number of benefits these projects offer compared to ground-up new construction. First and foremost, a conversion can be your best bet if you\u2019re targeting a location where land availability is an issue, as is the case in dense urban areas like New York City, or in situations where proximity to an existing facility is a priority. The latter has dictated many health-care conversions our team has managed for clients who want their new facility near an established medical campus. When vacant land isn\u2019t available, repurposing an existing space or building is often the only option.<\/p>\n

Environmental benefits are another upside of repurposing existing properties, given the raw materials, energy and other resources that go into new construction. Likewise, a retrofit can also be an opportunity to improve the efficiency of an older building by replacing older MEP systems; adding insulation and updating windows and vapor barriers to minimize energy loss; and making other updates based on LEED standards to improve the building\u2019s performance from a sustainability standpoint, while also creating a better environment for occupants.<\/p>\n

Of course, there are downsides to repurposing a building, too, that should be weighed. And you may not even know what they are until you start opening up walls to see what\u2019s behind them, particularly if as-built plans and thorough maintenance records aren\u2019t available. As a construction manager, we pride ourselves on our problem-solving skills and ability to handle the unexpected, but it\u2019s important for clients to understand it\u2019s impossible to anticipate every potential issue and something unforeseen could add to the complexity of a conversion project\u2014not to mention its timeline and budget. While we have long been using laser scanning as a less obtrusive way to assess existing conditions, we are intent on continually increasing our ratio of digital to physical probing needs. It is imperative to look at these projects from a cost\/benefit basis and involve a trusted construction partner to provide information and support in assessing the potential risks.<\/p>\n

Office Today, Apartment Tomorrow<\/em><\/strong><\/h2>\n
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Brian Marman<\/p><\/div>\n

When weighing a possible redevelopment, it\u2019s helpful to keep in mind that, from a construction standpoint, some property types lend themselves to a conversion more than others, depending on how different factors and features translate to the proposed new use.<\/p>\n

For example, many industry professionals are talking about different ways to repurpose older office space if vacancy rates remain high. Residential is one new use discussed frequently for office properties, and the size and location of these buildings can certainly make them good candidates. But one important factor is the footprint and configuration of the floorplates. If they are too deep, there will be challenges getting light and air into the back of residential units. This can be solved by cutting an interior atrium to create an open core, but that makes the conversion much less straightforward than with a property where the floorplates align more directly with residential use.<\/p>\n

Existing hotels are another good fit for conversion to residential given the density of rooms that can easily be combined into units, as well as configuration of plumbing and other mechanicals providing service to individual rooms. For the same reason, these properties also work well for health care\u2014a surging sector where high demand has developers strategically pursuing conversions in targeted locations.<\/p>\n

In fact, we\u2019re also seeing a trend of vacant retail becoming prized targets for transition to medical use, such as a former Sears in Long Island that our team is currently converting into an ambulatory care facility with a large radiology suite. Big-box properties are incredibly attractive for this type of project because they are typically built with generous, open footprints and high ceilings, providing ample space to run medical gas, exhaust ductwork and other systems overhead while allowing easy access to service and maintain those systems in the future.<\/p>\n

As a bonus, retail properties often have exterior real estate that is ideal for setting up a \u201ctank farm\u201d for medical gases, as well as ample parking for patients. Many also have existing loading docks\u2014a feature that\u2019s expensive to build but absolutely necessary in a health-care setting where large, heavy equipment, such as magnets used in imaging labs, will regularly have to be replaced over the life of the facility.<\/p>\n

Finding a good match for conversion to a life sciences property comes with its own set of parameters. As with health-care facilities, these buildings need either rooftop or adjacent outdoor space for tanks to store various gases. Likewise, the need to run gas lines and ventilation systems to individual workstations and lab areas makes properties with high ceilings and open floorplates a good fit. Each lab also has hoods that need to exhaust out the roof, so buildings with a lower rise\u2014such as a six-story warehouse\u2014are advantageous, since a specialized exhaust system won\u2019t have to be run more than a few floors high. Finally, distance from other buildings is important to consider so that fumes from the exhaust won\u2019t impact neighboring properties.<\/p>\n

Keys to Redevelopment Success<\/em><\/strong><\/h2>\n

While the specific details and construction approach of each conversion project will vary, here are several overarching strategies for success that apply to any redevelopment, regardless of sector:<\/p>\n