From a small northwestern observatory…

On Wednesday, I’m appearing in a video for the Appraisal Institute on adaptive re-use of real estate. It’s a panel of leading experts designed to provide guidance for AI members and others on the impact of the pandemic. My own contributions will mainly be on the adaptive reuse of brownfields and other contaminated sites, and at the other end of the spectrum, high-end properties, such as historic structures, which are worthy of preservation.. However, I anticipate a wide ranging discussion from the panelists.

Consider a building which still has life in it, or perhaps needs to be preserved for architectural or preservation reasons, but the original uses are no longer economically feasible. One of my favorite examples is the old Greyhound Bus Station in downtown Columbia, SC:

Built in the 1930’s, it was closed in 1987, but designated for preservation and named to the National Register in 1989. It was acquired by a local bank and adaptively re-used, with the old ticket windows becoming teller windows. The bank eventually left, and the building was adaptively re-used again, now as a plastic surgeon’s office. Clearly, the building still has life in it, and in fact contributes to the Commercial Historic District which is now also listed on the National Register.

Within the National Association of Realtors, there is a great organization called the Certified Commercial Investment Member Institute, or CCIM for short. The CCIM designation, awarded to Realtors who meet their exacting standards for ethics, training, and experience is analogous to the Appraisal Institute’s MAI or SRA designations. The CCIM Institute has been on the forefront of tracking adaptive re-use for quite some time now, as this is an important component of the real estate landscape. They issued a great report on this topic in 2018, and if interested, you can download it here.

The CCIM Institute is in the early states of developing an adaptive re-use index, focusing first on major CBDs such as Los Angeles, Dallas-Ft. Worth, Chicago, Atlanta, and Charlotte. Early sampling, reported in their study, suggests that as of 2018, adaptive reuse constituted 1% – 2% of all commercial real estate space in the U.S., and that figure was expected to grow to about 4% as a result of store and mall closings, e-commerce, and artificial intelligence. I would add that this growth rate will probably accelerate due to the impact of the pandemic and the resultant recession. While these numbers may not seem huge, the CCIM Institute suggests that adaptive reuse is in the early states of its lifecycle, and that this will become an important investment vehicle in the same way that historic preservation became investment-worthy in the early 1980s.

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