An Example
Let
me offer an example: A small Southeastern town took what might have
been a killing blow a few years back when the major employer pulled up
stakes and moved manufacturing operations to China. Hundreds lost jobs,
the local economy withered, and the general outlook for the area was
bleak at best.
Still, the town had a lot going for it. The area
had a proven work force, access to a major interstate, and an active
and engaged economic development office - the essential trinity of
attracting industry. Fast forward several years, and a new manufacturer
moves to town. The company is wrapping up construction on a
state-of-the-art manufacturing facility, hiring has commenced, and the
final piece of the puzzle is yet to be solved: affordable distribution
space to make the decision to keep operations in the United States
worthwhile.
Ideally, the new manufacturer would have preferred
to build a warehouse and distribution facility on the same site as its
production operations. Being able to manufacturer goods, send them to
the warehouse on a belt, and house everything under one roof was the
logistical best-case-scenario. However, this would have been a costly
move. New construction and land costs forced the company to consider
smart alternatives.
That takes us back to the major employer who
moved to China. When the company moved, it took jobs and revenue away -
but it left behind a massive building. The aging reminder of better
days was about to become the silver lining for the new manufacturer in
town. The new manufacturer's site selection teams had been in touch
with a developer who specializes in adaptive reuse to help find a
feasible solution. The developer invested in the property, converted it
from manufacturing to distribution/warehouse space, and solved the new
employer's problem. While it wasn't on the same site, the new property
was only a few miles away - still close to interstates and a radically
more cost-effective solution than new construction.
The Key Components
This
story had a happy ending, but that is not always the case for those
investing in buildings with the intention of converting them. The risks
can be high, and successful conversion is not a quick venture by
anyone's clock. Still, there are key components to look for when
considering a purchase for reuse:
• Location - The higher the
demand for space, the closer the proximity to major transportation
routes - interstate, rail, and air - and the more industry located in
the area, the better.
• Local Resources - A friendly economic
development office is essential for successful adaptive reuse. Red
tape, politics, and public interest are major considerations in
converting a property, and it is important to have people on the
ground, in the area, who are pro-industry.
• Demand - A smart
developer will have a responsive long-view approach to development, not
an "if we build it, they will come" attitude. This means staying
plugged in on the needs of site selectors, understanding industry
trends, and keeping an ear to the ground about trends to come. By no
means am I implying that there is no room for creative ideas and new
solutions, but the goal of adaptive reuse is to meet existing needs,
not to reinvent the wheel.
• Versatility - The more potential uses
for a property, the better. Existing features such as working dock
doors, solid infrastructure, good cubic footage, well-maintained
inroads, and numerous entrances/exits are essential.
Clearly,
for the simplicity of the concept, adaptive reuse is not a
straightforward business move. There are many variables to consider,
and flexibility is critical. That said, in the age of tearing down and
rebuilding, it could be both profitable and satisfying to breathe new
life into a property either on the verge of decline or on the brink of
a fresh start.
David Marks is
a senior vice president of Tower Investments, LLC, a national real
estate and development company with more than 100 properties in 17
states and an industrial portfolio of 10 million square feet. Tower
specializes in finding solutions to meet clients' unique requirements.
To learn more, please visit www.towerinv.com.
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