Transwestern has released a report examining a number of creative office projects that have generated substantial returns for investors upon completion. The adaptive reuse developments span Boston, Chicago, Los Angeles, New York, Phoenix, San Francisco, and Austin, Texas. The report also highlights 20 additional large creative office projects currently underway across the country.
Michael Soto, Director of Research in Southern California and co-author of the report, explains that while creative office conversions are not new, what is different this cycle is the sheer volume of creative office exits nationally at core/core-plus pricing that have occurred during the past five years – with the buyers being major institutional investors or well-known owner/users.
“The conversion of a property from industrial or retail use to creative office has become an increasingly popular value-add strategy for investors,” Soto says in a release. “Two trends are fueling demand for this type of differentiated office product: One, technology, advertising, media and other companies trying to attract millennials are interested in the characteristic features of creative office space – open floor plans, natural lighting, common spaces and amenities such as cafés and rec rooms. And two, tenants are returning to cities, where they can take advantage of live/work/play environments.”
Based on favorable exit pricing of some major creative office projects around the country, this type of value-add strategy, on this large scale, is now being considered by developers, either via direct investment or joint-venture partnerships with equity partners. Conversely, stabilized creative office properties are on the radar of many national and international institutional buyers that are paying traditional trophy Class A pricing for these types of properties, usually based on the credit-worthiness of the tenant, as well as the location of the project.
The report cautions, however, that many of these projects were acquired and developed under very different economic conditions than exist today.
“Rising land, building and construction costs – especially in hot neighborhoods – may add more risk when compared to a few years ago, when we were at a different point in the real estate cycle,” said Sandy McDonald, Director of Research in Chicago and co-author of the report. “In addition, adaptive reuse often comes with hidden costs and potentially expensive future property modifications.”
Moreover, the popularity of the creative office concept means that there is more inventory in the market today. Landlords that own existing office buildings or are doing ground-up development are realizing that they must consider strategic property enhancements and creative office-associated tenant amenities to stay competitive in the marketplace.
To view the complete report, titled Creative Office Projects: Adaptive Reuse Generates Staggering Returns for Investors, click here.
Related Stories
| Aug 11, 2010
City offices to up daylight, reduce water use
Breaking ground this month and scheduled for completion in November, the Palmetto Bay Village Hall in Miami-Dade County, Fla., will become the operating center for the mayor, village commissioners, government departments, the police department, and commission chambers. The two-story facility has been designed by JMWA Architects to win LEED Gold certification.
| Aug 11, 2010
Glass features keep Phoenix high-rise cool
A 26-story, 700,000-sf glass-clad tower has become downtown Phoenix's first office high-rise in eight years. One Central Park East, developed by Mesirow Financial, designed by SmithGroup, and built by Holder Construction Company, contains 495,000 sf of office space spanning 16 floors, plus a nine-level parking lot and ground-floor retail space.
| Aug 11, 2010
New HQ for automobile association stresses employee collaboration
AAA Northern California, Nevada, and Utah (AAA NCNU) has a new corporate headquarters in Walnut Creek, Calif. The interior of the six-floor, 250,000-sf building features an open layout by architecture firm Gensler to encourage greater collaboration across the automobile association's departments. Targeting LEED Gold certification, the building uses wood from Forest Stewardship Council-certified...
| Aug 11, 2010
Project's mixed materials downplay massing
Philadelphia-based KlingStubbins provided design services for the 120,000-sf Carnegie Center, which is part of the 103-acre mixed-use Carnegie Center West development in West Windsor Township, N.J. The four-story building features horizontal brick bands, ribbons of glass, aluminum accents, and metal end panels and curtain wall at all four corners to break up the building's massing.
| Aug 11, 2010
Firehouse converted to hip hot property
Sound the alarm! A 9,000-sf former firehouse is being converted into a new multipurpose space for ZUMIX, a nonprofit music and arts organization that's partnering on the project with Landmark Structures of Woburn, Mass., and the East Boston Community Development Corporation. The $2 million renovation of the 1920s structure, known as Engine Company 40 Firehouse, includes a complete gut job to ma...
| Aug 11, 2010
High-tech tower targets LEED Platinum
Construction is slated to begin on the new $38 million AI Tech Center in Hartford, Conn., in spring 2010. The Building Team, which includes Suffolk Construction Co., CBT Architects, and Jones Lang LaSalle, planned the high-tech 13-story, 259,000-sf tower to meet LEED Platinum certification. Green features include photovoltaic power, a fuel cell power plant, abundant natural lighting, and a roof...
| Aug 11, 2010
And the world's tallest building is…
At more than 2,600 feet high, the Burj Dubai (right) can still lay claim to the title of world's tallest building—although like all other super-tall buildings, its exact height will have to be recalculated now that the Council on Tall Buildings and Urban Habitat (CTBUH) announced a change to its height criteria.
| Aug 11, 2010
New pavilion planned for famous boulevard
Located in a prime spot along Santa Monica Boulevard in the Westwood neighborhood of Los Angeles, the Santa Monica Pavilion will have 9,000 sf of retail space, 35,500 sf of office space, and two below-grade parking levels when it opens in late 2010. The $10 million, three-story building extends a full length of the block to create a window wall of blue-gray translucent, fritted glass panels ove...
| Aug 11, 2010
Firm goes for Gold with office design
DLR Group is designing its new Omaha, Neb., headquarters to achieve LEED Gold. Sustainable features being incorporated into the three-story, 39,000-sf building, which is part of the city’s new Aksarben Village mixed-use development, include daylighting, outdoor workspaces, native landscaping, a green roof, and the pursuit of renewable energy credits.
| Aug 11, 2010
Mixed-use Seattle high-rise earns LEED Gold
Seattle’s 2201 Westlake development became the city’s first mixed-use and high-rise residential project to earn LEED Gold. Located in Seattle’s South Lake Union neighborhood, the newly completed 450,000-sf complex includes 300,000 sf of Class A office space, 135 luxury condominiums (known as Enso), and 25,000 sf of retail space.