empty steel structure warehouse

7 Adaptive Reuse Options for Vacant Properties

As every commercial real estate owner knows, it’s important to revive vacant property as quickly as possible since unoccupied property drains cash flow, impacts the site’s value, and poses liability risks. Vacant structures are linked to increased crime rates, including arson and vandalism. Plus, insurance, taxes, and maintenance must be kept up whether or not the property is occupied.

Many commercial property owners are finding that adaptive reuse, i.e., repurposing an existing building for an entirely new and different use, offers an opportunity to revitalize the property and give new life to the surrounding community.

We’ve included seven interesting examples of adaptive reuse that we’ve seen out there:

Empty suburban shopping malls or retail complexes can be transformed into lifestyle centers featuring hotels, restaurants, gyms, co-working office spaces, retail and entertainment venues, and civic amenities such as libraries.

Industrial buildings or warehouses have been retrofitted to become small workshops or craft breweries. The craft brewing business is booming, and large, sturdy warehouses are ideal for this type of business.

Distribution centers have been outfitted for new life as vertical farms. These large open spaces are perfect for vertical indoor growing, and this mode of farming requires far less land and water than a traditional farm. In addition to urban agriculture, urban aquaculture is also becoming a trend.

Schools are being repurposed as senior or communal living centers. Thousands of schools close down every year, and many of the campuses could easily be converted into residences for seniors or special needs populations.

Empty office buildings can be modified to accommodate multi-family living quarters. The demand for multifamily units is on the rise, especially in metropolitan areas. Through adaptive reuse, the need for more urban living space is being met.

Worldwide, cities are turning old industrial sites into public spaces that highlight the former usage and historic infrastructure of the area.

Vintage railway trestles, cobbled pathways, and water towers add charm and character to the sites. Examples include the High Line in New York City, which attracts more visitors than any other destination in the City, and the Gas Works Park in Seattle, which features remnants of a coal gasification plant.

Adaptive reuse is often less costly and less invasive than new construction. Some cities offer incentives for adaptive reuse, such as flexibility in building codes and zoning requirements or tax incentives.

Adaptive reuse is predicted to play an important role in the real estate ecosystem of the future. Repurposing old vacant structures can give a neighborhood a new lease on life, bolster the local economy, and enable people to live, shop, and play close to their workplaces.

If done in a thoughtful and sustainable way, adaptable reuse can also help preserve the social and cultural heritage of a region and provide a boon to the environment.

In many cases, a brewery, food co-op, or senior housing complex moving into a vacant site is a harbinger of impending urban revitalization.

Calculating cost

Beware the Fright of Hidden Occupancy Costs

When you sign a commercial real estate lease, you commit to paying rent and, potentially, common area maintenance (CAM) fees. But other expenses may be embedded in the fine print of the lease contract, and sometimes essential services are excluded entirely from the rental agreement.

Such costs are often unpredictable, and they may vary dramatically from one year to the next. If you are not aware of these hidden occupancy costs, you could be in for a big (and expensive) surprise.

These so-called “hidden occupancy costs” include:

Variable CAMs: CAM fees vary depending on the lease. Things like trash pickup, landscaping, snow removal, and parking lot maintenance are generally included, but the amount charged for such services differs depending on how the lease is structured. It’s important for you to understand how the CAM fees are calculated and assessed.

Dead space: Occupancy costs such as rent and CAMs are usually assessed on a per-square-foot basis. However, not every square foot of office, retail, industrial, or even warehouse space is equally valuable. Depending on the shape and configuration of the space, its visibility, possible obstructions, and various other factors, you could find that a portion of your footprint is less desirable or even virtually unusable. In other words, if you lease a 3,300-square-foot area, but only 3,000 square feet are usable, you may be overpaying by 10 percent.

The building’s load factor: In most buildings, the occupancy cost includes not only the footprint your business occupies but also a proportional share of common areas such as hallways and lobbies, restrooms, grounds, and amenity areas. If your building has a 20 percent load, you are essentially paying for 25 additional square feet for every 1,000 square feet you lease.

Property insurance, taxes, and general liability insurance: Tenants are responsible for paying a percentage of these expenses, again based upon the square footage the business occupies relative to the overall square footage of the building.

Security services, cleaning costs, and utilities: These expenses can sometimes cause “sticker shock,” as can the cost for repairs, modifications, or upgrades that you may need in order to make your space usable. In some cases, even basic utilities like water, electricity, and sewage are not included in a monthly lease and must be added to the total occupancy cost. Internet, cable, and phone service are usually not included even when other utilities are.

Other building charges: Read the terms of your lease carefully so you don’t miss any other fees that you might not expect. Administrative fees, special assessments, signage fees, parking fees, after-hours HVAC fees, markups on maintenance services, and even requirements that you use an in-house caterer can really add up.

Incidentals not covered by the lease: You will likely be responsible for covering certain other expenses related to your business premises, including pest control services, plant services, and furniture or equipment rentals. Be sure to allow for routine maintenance and unexpected repairs when calculating your total cost of occupancy.

For assistance with this process, please contact my office. I’d be happy to help you find any hidden costs in your potential investments.

Empty parking lot

Avoid Parking Pitfalls with Commercial Properties

Location matters in all aspects of real estate, including parking. Whether owning or leasing property, you need enough parking for your customers and employees.

With this in mind, consider the following aspects of this important property feature as you weigh potential options.

Parking ratio: Determine the building’s parking ratio. This is found by dividing the number of available parking spaces by the amount of leasable property. These ratios are usually written as number of spaces per 1,000 square feet.

Lease terms: If you’re a tenant, negotiate parking into leases. Parking is only guaranteed if it’s in writing. Be sure to specify who is responsible for maintaining the parking spaces.

Parking laws: Check municipal parking bylaws and ensure the property has the required number of handicapped parking spots to fulfill accessibility requirements.

Customer experience: Good parking can help enhance the customer experience. Look for ample space, since adding parking later can be difficult and expensive. Make sure parking is easily visible and accessible near the entrance. Watch for any issues those with mobility concerns may encounter. If parking is shared with other businesses, spaces that are designated “customer parking” can be extremely beneficial.

Employee experience: Staff need good parking too. Affordable and convenient parking can help attract and retain workers. Decide how much you’re willing to pay for employee parking and be sure to include this in your cost estimates.

Real Estate Agency. Young Couple Signing Financing Contract

5 Essential Contract Clauses to Protect Buyers

A seller lists their property for sale, but typically a potential buyer initiates the negotiations to purchase that property. As a result, the buyer’s agent often puts language into the contract that limits the buyer’s potential financial liability. Here are five conditions that all contracts should include to protect buyers.

Financing is probably one of the most commonly used contract clauses. Most buyers don’t have the liquid capital to buy properties without additional financing arrangements. This clause protects the buyer against the potential inability to secure a loan for the property. It is highly recommended that you seek advice from a mortgage professional prior to proceeding with any potential offers to buy.

Insurance is now commonly required in order to secure financing. Quotes are easily obtainable through most insurance brokers, and a short amount of time is usually sufficient to fulfill this condition.

Title searches help buyers determine the true owner and any rights or encumbrances that are associated with the property. It should also identify any unresolved debts held against the property’s title that could hinder the final sale.

Environmental assessments are more common with industrial or commercial warehouse properties, but there are a variety of reasons that investors may wish to review the environmental integrity of a property. Older properties could have buried fuel tanks or contain contaminants that could harm tenants.

Review of documents is an essential part of the due diligence required to safeguard your investment. Documents concerning the building history and operation are necessary to make an informed purchase decision. It is recommended that you consult knowledgeable professionals to assist with the review of these documents.

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