All types of commercial real estate improvements are routinely razed upon becoming physically deteriorated or obsolete. All except one: highrise office towers.
Skyscrapers, to use a 20th century term, have been built in great numbers, beginning early in the last century. These structures, ranging generally between 40 and 100 stories tall, are in effect “permanent” improvements, due to the extremely high cost of demolition. Given their height, steel frame superstructures, and locations in densely developed areas, these buildings cannot be imploded. The only means of demolition is by disassembly. I’m not expert in such costs, but they must be extremely high.
Several interesting questions thus arise. As tenant tastes and requirements change (as they undoubtedly will), will such properties ultimately become “ghost buildings”, i.e., unoccupied and closed, that cannot feasibly be razed? At some point, will architects design such structures for easier, less expensive modification (e.g., re-skinning of exteriors, installation of evolving technologies, etc.)? Could such structures be designed in a way that would facilitate large component disassembly, thereby making demolition feasible? Will local governments be forced to provide large redevelopment incentives to owners of buildings in order to preserve the ad valorem tax base, as was done with the Mercantile complex?
One potential solution to this dilemma is to convert such properties to residential usage. Although this has been done with some success, the costs associated with conversion are high, often requiring public-sector assistance for feasibility. Even then, there are a relatively limited number of people who are interested in living in such properties.
I don’t have the answers to these questions, but they are interesting to contemplate.
Steve Crosson is chairman and CEO of Crosson Dannis Inc., which provides real estate appraisal and consultation services. He also serves as chairman and editor in chief of The Appraiser Journal.
