• Free for qualified executives and consultants to industry

  • Receive quarterly issues of Area Development Magazine and special market report and directory issues


Old Buildings Equal New Opportunities

Redeveloping abandoned urban industrial buildings can reap bottom-line benefits for both the buildings' owners and the companies that choose to locate in them.

Nov 09
In another era, when gritty manufacturing activity hummed at the core of America's central cities, venerable industrial buildings dotted the urban landscape. Much of the nation's employment depended on the activity in these buildings, and much of its economy depended on what was made in them.
Today, many of these buildings sit long-since abandoned - still sturdy, but designed and constructed to serve the business world of a different era. But the laws of economics being what they are, real estate that is no longer wanted drops in price. And when you've got an affordable facility in a good location, someone is going to want it.

The emergence of modern high-tech companies - especially those seeking open office space, natural light, and urban settings - has inspired a comeback for many old industrial buildings. So, too, has the movement to re-use already developed land wherever possible as an alternative to developing remaining green spaces. And while developers can face challenges wiring old buildings for modern technology, many users find the price, location, and convenience of the buildings make them worth the trouble - especially as the growth of wireless technology lessens that trouble.

Buildings Back in Business
• In Pittsburgh, Pennsylvania, a 50,000-square-foot trucking terminal had sat vacant for decades before it was purchased in 1999 and redeveloped as Riverfront Place. Today it is the home of companies in the engineering, insurance, and consulting sectors

• In Grand Rapids, Michigan, the so-called "Price Line Building" was abandoned by Siemens after the multifaceted technology company had used its 90,000 square feet for manufacturing for several years. Enter AMI Entertainment, maker of Internet-based digital jukeboxes, which choose the building to house both administrative and technological operations, including a backup to the Illinois-based system that ensures its jukeboxes across the country always have access to thousands of music selections via the Internet.

• In Chicago, Illinois, an old book bindery was available for the right price and was snatched up by an auction company that will need to refurbish it to handle modern technological operations, as well as display and event space for a discerning audience. One of the top executives of the family-owned company is personally directing the building's transformation.

• In Farmingdale, New York, outside New York City, an electronics distributor needing more space, access to loading docks, and a better location - without paying a fortune - chose an abandoned factory. The project developer dutifully completed all building redesigns before the new tenant moved in.

Case Study: Chicago
In many cases, the choice of an urban building for a high-tech company is more than just a choice of aura, or even of economics. In many cities, optic lines run along rail lines, which traverse the central city. Depending on a high-tech company's particular kind of operation, it may be a necessity to locate near those lines. For others, a simple value proposition justifies the choice, although that doesn't always mean its implementation will be easy.

Sean Susanin, president of Chicago-based Susanin's Auctions, chose to lease and eventually buy the aforementioned former book bindery at 900 S. Clinton because the numbers and advantages simply added up to the auction company's advantage. "Location was critical for us," he says. "We kind of made a checklist of the things we had to have, or felt were critical for this move. Some argued that the auction business is a destination business, but we really wanted a central location, so location was paramount and probably at the top of the list."

Size was also crucial for a company that was just 10 years old and still expanding. After previously occupying only 12,000 square feet, Susanin found three stories with 36,000 square feet in the abandoned building. The first floor was converted for office use, the second for exhibition space, and the third for a private gallery for bidders.

Wiring the building for the company's network was somewhat eased by the emergence of wireless technology, says Susanin. Although the company is not all wireless, its operations minimize the use of on-site IT hardware. "There was a lot of electrical already here," he says. "So we just had to adapt that to our needs. As far as computers, a lot of what we do is just wireless, and it's really come together pretty easily. There's no computer that's hard-wired to our servers, so a lot of the staff roams throughout the building with their laptops."

Of course, old buildings have their unique characteristics, for better or for worse. For Susanin, two features present mild frustrations and serve as reminders of the building's age. The first is the lack of plumbing in specific spots in the building where he would like to add bathrooms. The other is the ubiquitous presence of columns throughout each story of the structure,  with one occurring every 16 feet. Susanin also sees little point in trying to improve the appearance of the building's cement floors. Instead, he covers them with Oriental rugs wherever it makes sense to do so, and otherwise chalks up their appearance to the building's origins.

Tech Issues
Barry Reid is chief operating officer of ChipTech, the Farmingdale, New York-based electronics distributor that took up residence in an old industrial building in this New York City suburb. The cost and convenience, he says, far outpace their old space closer to the city, although at 12,000 square feet for 36 employees, the space is far from massive. "We're ISO 9001, so we needed specific areas sectioned off," he says. "We have a front 6,000 square feet, which is mainly made up of offices, accounting and purchasing, and in the middle we have 2,500 square feet of shipping and receiving. The balance is a warehouse with the loading dock in the back."

The company's high-tech requirements were extensive. "We do have a lot of computer systems and we have camera security throughout the building, so we had to have extra power and extra wiring done," says Reid. Many owners of older buildings that have been subdivided have found it wise to bunch high-tech companies in the same area of the building so they can more easily achieve the technological redundancy the companies need. That strategy works if the building can handle the bandwidth the tenants need; heavy floor loads, high ceilings, and proximity to fiber loops are key.

This approach worked well during the renovation of 75 Broad Street, a 70-year-old building in New York City. Originally slated to be renovated for residential use, current owner JEMB Realty saw the successful transformation of a neighboring building for high-tech clients and decided they could do the same. A $30 million improvement project has attracted tenants such as Teleport, E-Spire, DBN, World Comm, and NET-tel.

David Hunt, a New York-based realtor, works extensively with developer Anton-Cerrone Associates, which has developed a specialty in renovating old buildings for high-tech use. The current market, he says, is very receptive to this particular kind of re-use. And new wiring technology is making the transformation easier. "Today, every building is wired, so that's a bit of a non-issue," he says. "The green technology we're using includes more efficient light fixtures and all of that. But these buildings aren't LEED-certified. It's more just satisfying a market demand."  

Exclusive Research