Lance Silver and Stuart Harting: Old and improved: Development is trending toward adaptive reuse by rehabilitation

A harsh business climate frequently gives rise to innovative marketing and development practices as companies seek creative ways to survive and advance despite the economic turmoil. This is especially true for commercial real estate development, which has suffered from the stalling of new construction due to lack of financing, reduced market interest, and increased risk aversion. Developers, owners, and enterprising brokers have turned their focus to adapting existing properties for new usages through renovation and use rehabilitation. It's no longer sufficient to simply view a property through a broker's eyes. The insight that a background in real estate development brings to the analysis of a property helps to identify the best possible use of the product in the market. This pragmatic creativity in perspective opens up avenues that elude brokers who focus solely on what a building is and not what a property ultimately can be. As one of the foremost practitioners of adaptive reuse, our development firm, Silver and Harting, has increasingly been called upon to consult on properties that are no longer marketable under their originally intended function. We bring this unique skill to our brokerage work with NAI Mertz. Here in Southern New Jersey, we recently brokered the sale of a 240,000 s/f, 205 unit former hotel in the heart of Cherry Hill, N.J. The buyer, Spring Hills Senior Communities, will be converting the property to a luxury assisted living facility. Rather than undertake a full-scale development project, Spring Hills opted to transform the existing structure to suit their design and operation plan. In doing so, they were able to acquire a prime location that would not have been an option if the prohibitive costs of demolition, site preparation, and a complete build-out were factored into the project. Opting for reuse as opposed to building anew will allow Spring Hills to realize significant cost savings and an accelerated development timeline without compromising on the ultimate vision for the facility. We've also recently consulted with multiple office building owners whose mounting vacancies have had a substantial negative impact on the value of their properties. Philadelphia, in particular, has seen a surge in interest in the conversion in class C (and some class B) office buildings into apartment housing. One of our recent consultations centered on a 200 acre parcel containing a 250,000 s/f, two-story office building that now stands 100% vacant. Our proposal, which is under consideration, was to convert the building to high-end apartments and use the remaining acreage as a Christmas tree farm or other dollar yielding crop usage. New construction activity in Southern New Jersey has been consistent with the rest of the country - down considerably from its height in the mid 2000s. The projects that have gotten off the ground in recent years have typically benefited from assistance in financing or other incentives. The majority of the current sites under development are located within Economic Development Zones, or service industries that New Jersey views as key to its future prosperity, such as research and technology. Often these adaptive reuses have sustainability or green implications. Extending the life of an existing structure is essentially one large recycling effort, and is recommend by LEED as one of the most effective measures a company can take in terms of minimizing their impact on the environment. New Jersey offers multiple programs and grants to encourage firms to incorporate sustainability measures into their property management plans. In the near future, buildings lacking LEED or Energy Star certification will be placed at a significant disadvantage to those that have been upgraded to achieve the status. Brownfield sites, in particular, are an area where New Jersey is actively promoting redevelopment. Firms interested in brownfield development are eligible for assistance with financing, remediation efforts, and regulatory compliance. Southern New Jersey is home to multiple State designated Brownfield Development Areas. The Port of Paulsboro, currently under development and soon under construction, will be built upon a brownfield site that formerly hosted an oil refinery complex. Once completed, the project will give Gloucester County a fully modern port facility and bring an estimated 500 jobs to the region. We applaud the planning and economic advisory for their collective efforts with this economic generator for the region. The recent downturn in the economy bears out that when competition is intense, product differentiation and adaptability are key to surviving and thriving. For the commercial realtor, the vision to sense that potential beyond the existing form and function will be a tremendous advantage. Lance Silver and Stuart Harting are associate brokers at NAI Mertz, Mt. Laurel, N.J.