As a growing population moves to DFW, making room for the millennials and the new tech hires may not mean spilling over to the suburbs. It may lie in repurposing the real estate that’s already here, according a recent study.
In aco-sponsored by the CCIM Institute and Alabama Center for Real Estate, CCIM Institute chief economist K.C. Conway examined adaptive reuse in metropolitan areas across the country. He found that the trend of repurposing makes up 1 or 2 percent of commercial real estate, and he expects it to double in the next five years.
Adaptive reuse, put simply, is the process of repurposing an old building for a new use. This means, according to Conway’s definition, an existing structure that has become functionally or economically obsolete must undergo a change of use, and the new plan must be economically viable.
Conway says the last two criteria are important; some studies don’t include the change of use in their definitions so they can boost numbers for what is included as adaptive reuse. Economic viability is key too—it’s not really an adaptive reuse project if the project is only a cash suck.
Examples of adaptive reuse span the country, but Conway examined one in DFW: the FedEx Distribution Center enter in Mesquite, which opened last year after being converted from Big Town Mall. The 340,000-square-foot center, rather than becoming a hallmark of an old era, is now a successful and full warehouse. Many other malls could meet the same fate. By 2025, one-third of the more than 1,000 malls in the U.S. are expected to close or be repurposed, according to retail industry analysts.
Another company that could benefit from adaptive reuse is Dallas-based Topgolf, Conway says. “They’re starting to look at existing facilities. Things like Topgolf are a perfect experiential-retail use for some of these older warehouse-industrial areas,” he says. “I think we’re going to see a lot more of that.”
Conway says adaptive reuse is beginning to approach the size of self-storage real estate. Why the sudden push to make old things new? First, ecommerce: as in the case of FedEx, malls are going out of business across as online shopping gains popularity. Second, adaptive reuse feeds a push toward urbanism.
“We have this trend back towards urbanism,” Conway says. “Dallas obviously has it. Fort Worth is an amazing story with all that it’s been able to redo and [how it’s been able to] save historic Fort Worth and a lot of its character,” he says. “Another great example in the Dallas-Fort Worth area is Granite’s Factory Six03, the old West End Marketplace deal, where they converted it to creative office.”
Conway says as more people, especially millennials, gather in cities, it makes sense to use the real estate that exists rather than forcing people out of the hubs they’d like to stay in. And adaptive reuse is not only good for density—it can be smart financially. Conway says, on average, acquiring and repurposing a building is 15 to 20 percent less than new construction. (But, of course, that’s not always the case. Granite ran into some unexpected issues at Factory Six03 and ended up spending $77 million on the project.)
“It can solve a myriad of challenges that cities face: How do we get economic development? How do we attract companies or businesses? How do we address affordable housing? How can we get more green space? All of the big city challenges today really can be addressed very effectively through adaptive reuse,” Conway says.