Editor’s note: NAIOP New Jersey will highlight the topic of adaptive reuse in its upcoming program, Adaptive Reuse: Tackling the Challenges, on Dec. 6 at the Northeast Carpenters Apprentice Training Center in Edison.
By Michael G. McGuinness
As one of America’s original 13 colonies, New Jersey has a rich and historic past. This includes former industrial properties or commerce centers in urban areas, more recently developed office parks in the suburbs and older office buildings — many of which largely stand empty — in central business districts. These vacant relics — together and individually — can be transformed into new, vibrant centers for live, work and play.
It’s called adaptive reuse, and Wikipedia defines it as the process of reusing an existing building for a purpose other than its original purpose. It is also known as recycling and conversion. Adaptive reuse can be an effective strategy for towns and developers to optimize existing buildings. Adaptive reuse can be an attractive and sustainable alternative to new construction. Adaptive reuse has saved thousands of buildings from the wrecking ball, giving them new life as critical components of urban regeneration.
Not every old building can qualify for adaptive reuse. Architects, developers, builders and entrepreneurs who wish to rejuvenate and reconstruct a building must first make sure the finished product will serve market needs, will be completely useful for its new purpose and will be competitively priced.
Adaptive reuse often retains a building’s unique and distinguishable features, like the structure, shell and interior materials. Not restricted to buildings of historic significance, this type of revitalization can also be done to obsolete buildings. Some urban planners see adaptive reuse as an effective way of reducing urban sprawl and environmental impact. Revitalizing existing but obsolete buildings by giving them new use and purpose can be a wonderful asset to a community by keeping neighborhoods occupied and vital.
In a growing number of cases, repurposing older buildings is the right approach because ground-up construction is just too time-consuming. It also makes sense from a sustainability perspective and to qualify for financing from environmental, social and governance-minded lenders. What’s more, it attracts more discriminating tenants, given the substantially reduced need for new concrete and cement — and carbon emissions.
In New Jersey’s land-constrained market, developers are increasingly tackling these “conversions,” running the gamut from office to residential, mixed-use, industrial or life science; industrial (factory) to residential, office, mixed-use or motion picture and television studio and more. A partial list includes the Hanini Group’s Broad and Halsey Street Portfolio and Edison Properties’ Ironside, both in Newark; Prism Capital Partners’ Edison Lofts in West Orange and Wonder Lofts in Hoboken; CHA Partners’ Randolph Apartments in Plainfield, Thor Equities Group’s 95 Green St. in Jersey City; Inspired by Somerset Development’s Bell Works in Holmdel; GenMab’s U.S. offices in Princeton; Prism’s ON3 in Nutley and Clifton; and Hugo Neu’s Kearny Point in Kearny.
In New Jersey, nearly 6 million square feet of office space has already been converted to either multifamily housing or industrial in the last several years. The trend is similar to what has happened nationally in the last two years. On Nov. 2, JLL released its Office Chart of the Week showing that in 2021-2022, 52 percent of office conversions have gone to multifamily housing and 16 percent to industrial. According to JLL, “Post-pandemic shifts are driving developers to limit office development. Converted product largely consists of Class B and C assets over 30 years old, which have not generated positive net absorption. Conversion to new residential helps to rejuvenate central business districts where return to office has been limited.” It also helps to address the housing affordability crisis.
Potential advantages of adaptive reuse include cost savings on building materials (which have risen sharply of late), cost savings on building demolition, time savings and tax advantages for rehabilitating historic structures, along with energy savings and local, state or federal funding in the form of grants, low-interest loans and tax credits. Additionally, many of these older landmark buildings “have better bones and offer unique spaces, and people are willing to pay more for uniqueness,” according to Eugene Diaz, principal at Prism Capital Partners. The greatest disadvantage to adaptive reuse is that reconfiguring a building for a new use is often labor-intensive. This leads to heavy reliance on contractors and professionals to redesign and restructure the layout of the converted building to ensure ADA compliance, load capacity and other code compliance for stairwells, ventilation, plumbing, electrical, fire stops, insulation, egress and ingress. Having the “in-house” workforce to address these labor costs makes these conversion projects less costly and therefore more attractive.
In my research, I learned how Gensler, a leading architecture and design firm, developed a creative tool to help owners determine how successful a conversion project would be for any given building. The firm built an algorithm that analyzes data and information on the building and site that calculates the likely success of converting the building. The scoring criteria includes five categories: site content, building form, floor plate, envelope and servicing. Each category is weighted based on how much it positively contributes to the real value of the building, or return on investment. Other factors are walkability, access to transit, ease of planning units, window to core distance, number of elevators, existing window-to-wall ratio, loading, parking and more. The goal is to help the owner decide whether a conversion would help protect the value of the assets.
As mentioned, access to transit is a factor that helps contribute to a conversion project’s success. With hundreds of communities linked by rail, subway and bus, New Jersey should rank high for mobility. Other infrastructure types — water, sewer, power, internet — are also critical. Hopefully, our public officials will have the wisdom and courage to secure long-term and reliable funding to incentivize more communities to convert their vintage properties from vacancy to vibrancy.
(Portions of this article were obtained from: https://en.wikipedia.org/wiki/Adaptive_reuse; The Oct. 31, 2022 blog post, What it Took to Build Chicago’s Largest Private Chemical Lab in Fulton Market, by Jason Utah; and Gensler’s Oct. 6, 2022 webinar, From Vacancy to Vibrancy: Office to Residential Building Conversions.)
Michael McGuinness is CEO of NAIOP New Jersey and has led the commercial real estate development association since 1997. NAIOP represents developers, owners, asset managers and investors of commercial, industrial and mixed-use properties, with 830 members in New Jersey and over 19,000 members throughout North America.
