Adaptive Reuse: A Developer’s Guide

 In Industry, Insights
INSIGHTS

ADAPTIVE REUSE: A DEVELOPER’S GUIDE

As cities and developers are eager for in-fill and redevelopment opportunities to accommodate growth in burgeoning metro centers, communities are scrambling to try to preserve their local heritage. Is there a win-win? Proponents of adaptive reuse think so.

Since the Great Recession, more and more people have relocated to larger urban centers to pursue economic activity, resulting in an increasing demand for housing and amenities. As cities and developers scramble to meet this demand with in-fill and density within metro areas, they often look to redevelopment of underutilized or abandoned properties. However, in the mad dash to do so, historic buildings, often former manufacturers from the heyday of the Rust Belt, are torn down, putting our cities and citizens increasingly at risk of losing their ties to local history. In response, there is a slow but steadily burgeoning emphasis placed on adaptive reuse projects. While popular with local governments, historians, and fans of historic architecture alike, adaptive reuse projects can pose unique challenges for the unfamiliar developer. Here, we lay out six basic steps to help ensure your adaptive reuse project is a success.

What is “adaptive reuse” and how is it different from a remodel or historic preservation?

At its simplest, adaptive reuse is utilizing the structure of an existing, often historic, building and repurposing it. Unlike remodeling, which involves significant changes to a structure, adaptive reuse seeks to retain the key identity of the structure, but unlike historic preservation, adaptive reuse repurposes the interior. As such, adaptive reuse is unique in its ability to capture a piece of local history while breathing new life into it. Some of the more common examples you might see is an old warehouse converted into an apartment building, or the former home of a wealthy citizen turned into a museum or restaurant.

What are the advantages of adaptive reuse?

In a word: plenty. Adaptive reuse projects are quickly becoming popular with a wide range of people. For the developer, reusing an existing building reduces the cost of demolition and construction of the building core and shell. For cities and local governments, it’s a chance to meet today’s needs without losing their cultural identity and facing potential push-back from the community. This often means a much easier city approval process than a complete tear-down and rebuild, or even developing on a greenfield site. For the environmentally conscious, it means dramatically less waste produced from demolition and construction. For fans of architecture, historic buildings often featured unique design elements that just aren’t seen anymore due to cost, like complex masonry features. Speaking of which, those unique design elements can prove to be hugely useful when it comes time to market your newly-finished project.

What about the challenges?

While the advantages are plentiful, there are definitely challenges that need to be addressed. Many buildings that are suitable candidates for adaptive reuse have been poorly maintained over the years, if not outright abandoned. That means a wide array of potential issues that may or may not be apparent to the naked eye. And any time you’re dealing with a building with any historic qualities, there are guidelines at every level of government that you’ll likely need to follow. But if that doesn’t scare you, read on for our six steps for a successful adaptive reuse project!

STEP ONE

Identify your space and your goals for it

First thing first: you need a building. Look for old, abandoned or underutilized buildings in your city or region that you may not have noticed before. Maybe it’s that old warehouse or plant in the former manufacturing sector, or the dilapidated public works-era school building. Whatever it is, start by looking into the history of the building and get a sense of its character and importance to the community. Then identify the “why” behind your project. Why build it? Why would it benefit the community? Will it have economic benefits? Create needed housing or access to essential services? Uncovering your “why” will not only guide how you decide to repurpose that space, it will also be a major selling point in gaining approvals.

When it comes to adaptive reuse at J. Jeffers & Co., our goal is to find projects that enhance the community in which they’re located. Whether that means creating much-needed affordable housing, like we’re doing with CG Schmidt in Racine, or the rehabilitation of several historic Milwaukee buildings we have underway to provide student housing, each project should serve a larger purpose while staying true to the original character of the building.

  • Doug Geurts, Director of Development  |  J. Jeffers & Co.
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What do you see? Hip new restaurant? Chic coffeehouse? High-end retail space? Multi-family housing? Laser tag? 

STEP TWO

Have the building evaluated

This is a big one. Once you’ve found a building with history and character and identified a potential reuse for it, it’s time to find out exactly what’s under the hood, so to speak. Having a condition evaluation performed by a licensed, experienced contractor helps avoid costly and unpleasant surprises later on. Rotting floors, sinking foundations, soil contamination, mold, asbestos, lead, and more all potentially lurk in older buildings and can be a plague during construction. Identifying these issues early is critical for developing an accurate budget or determining if your project is financially feasible. Your contractor or construction management partner may suggest bringing in additional consultants, engineers or even conduct laser scans of the building to get a clear picture of what lies hidden behind walls or underground. Once this is done and you’ve determined it’s feasible to continue, it’s time for the exciting part.

money-pit

Money saver or money pit? There’s only one way to know for sure: have it inspected by an experienced contractor. Invasive inspections, laser scanning and soil sampling can help take the surprise out of any building project.

STEP THREE

Purchase the building

You’ve found a great building with a great location, you have a good vision for what you want it to be, you’ve had it checked out to ensure it isn’t full of radioactive waste, and you’ve done the math to ensure you’ll see a positive return on your investment; now it’s time to buy. Purchasing commercial real estate isn’t for the faint of heart, but it also shouldn’t be an overwhelming challenge. People buy commercial investment properties all the time, and they do so (the smart ones, anyway) with the help of a commercial real estate attorney. Your attorney will be your go-to person to help review and negotiate any sales agreements, making sure that there aren’t any potential obstacles with zoning restrictions or environmental concerns, as well as navigating the loan agreement process.

For first-time developers, here’s a quick guide to buying your first commercial property.

STEP FOUR

Register the building as a historic space

One advantage of an adaptive reuse project vs. new construction is that it can potentially qualify for a number of grants and tax credits to help finance the project. However, in order to receive those coveted historical income tax credits, the building has to be recognized and registered by the appropriate authorities. Depending on the building and your locality, this can mean registration with city, state and the federal government. In Wisconsin, commercial building owners who qualify for the Wisconsin Historic Preservation Tax Credit Program can receive 20% of the cost of rehabilitating the building, up to $3.5 million per parcel, and an additional 20% of the cost if the building qualifies for the Federal Historic Preservation Tax Credit Program. It (literally) pays to protect our local heritage!

What’s old is new again: UW Madison’s Carson Gulley Center, initially built in 1926, was given a complete update to continue to meet the needs of a changing campus. The center was awarded Madison Trust for Historic Preservation’s Historic Preservation Award. 

STEP FIVE

Find a design partner that shares your vision

Up until now, chances are that while you have a general vision for your adaptive reuse project, that vision is likely somewhat nebulous and probably has more holes in it than the roof of the building you just bought. Never fear, your architectural partner will help fill those gaps and turn your vision into something more or less buildable.

Select a partner that you feel understands your goals for the project, not just their own, and be sure they’re familiar with the Secretary of the Interior’s 10 Standards and Guidelines for rehabilitating historic buildings. While working together, be sure to ask yourself periodically, “are we preserving the historic character of the building through repair, or replacing it?”

Northwestern Mutual’s historic atrium was repurposed to serve as lobby and gathering space, preserving the character and historic nature with updated features and efficiencies.

STEP SIX

Find an experienced construction management partner

Call us biased, but we think this is a pretty important step and not a place to cut corners. Ideally, your construction manager should play an active role in the preconstruction and design process, using their expertise and knowledge of market conditions to help spot any potential gaps in drawings or cost-saving opportunities with design, such as material alternatives or building system options that can save money over their lifespan. The earlier you bring on a construction management partner, the more input they can have on the design of the building and the greater their ability to help identify potential road blocks or cost saving measures before drawings are finalized; in fact, you might even want to think of this as “Step 5A.”

Like with your design partner, you’ll want to be sure that your construction partner also shares your goals for the project so they can work to advance them throughout construction as well. For example, a savvy construction partner can help identify creative ways to reincorporate materials from the existing building in ways that enhance the character of the building (and save money). A good partner will proactively work to add value, not just follow a set of blueprints.

Many clients are surprised by how much we can do to ensure a project is successful from very early on, well before construction actually starts during the design phase. And the earlier we’re brought to the table, the more we can do to control how the project goes later on.

  • Dan Chovanec, Vice President  |  CG Schmidt

Like with your design partner, you’ll want to be sure that your construction partner also shares your goals for the project so they can work to advance them throughout construction as well. For example, a savvy construction partner can help identify creative ways to reincorporate materials from the existing building in ways that enhance the character of the building (and save money). A good partner will proactively work to add value, not just follow a set of blueprints.

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Protect your investment with an experienced building partner. Your builder should be proactive when it comes to mitigating your risk and ensuring you receive a quality finished building, on time and within budget.

Planning a construction project and want more information on how CG Schmidt can help with your adaptive reuse project? Contact our construction professionals today.

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