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
Office Buildings | May 5, 2023
9 workplace design trends for 2023
HOK Director of WorkPlace Kay Sargent and Director of Interiors Tom Polucci discuss the trends shaping office design in 2023.
Office Buildings | May 4, 2023
In Southern California, a former industrial zone continues to revitalize with an award-winning office property
In Culver City, Calif., Del Amo Construction, a construction company based in Southern California, has completed the adaptive reuse of 3516 Schaefer St, a new office property. 3516 Schaefer is located in Culver City’s redeveloped Hayden Tract neighborhood, a former industrial zone that has become a technology and corporate hub.
Mass Timber | May 3, 2023
Gensler-designed mid-rise will be Houston’s first mass timber commercial office building
A Houston project plans to achieve two firsts: the city’s first mass timber commercial office project, and the state of Texas’s first commercial office building targeting net zero energy operational carbon upon completion next year. Framework @ Block 10 is owned and managed by Hicks Ventures, a Houston-based development company.
Office Buildings | May 1, 2023
Office building owners face potential legal liabilities when adding new workplace amenities
Many landlords in the war for tenants have turned to offering new amenities such as conference room services, fitness centers with nutritionists, and high-end food and beverage offerings. To provide new services, landlords often engage with third-party vendors, which can present thorny legal liability.
Design Innovation Report | Apr 27, 2023
BD+C's 2023 Design Innovation Report
Building Design+Construction’s Design Innovation Report presents projects, spaces, and initiatives—and the AEC professionals behind them—that push the boundaries of building design. This year, we feature four novel projects and one building science innovation.
Office Buildings | Apr 24, 2023
Smart savings: Commissioning for the hybrid workplace
Joe Crowe, Senior Mechanical Engineer, Gresham Smith, shares smart savings tips for facility managers and building owners of hybrid workplaces.
Green | Apr 21, 2023
Top 10 green building projects for 2023
The Harvard University Science and Engineering Complex in Boston and the Westwood Hills Nature Center in St. Louis are among the AIA COTE Top Ten Awards honorees for 2023.
Design Innovation Report | Apr 19, 2023
Reinforced concrete walls and fins stiffen and shade the National Bank of Kuwait skyscraper
When the National Bank of Kuwait first conceived its new headquarters more than a decade ago, it wanted to make a statement about passive design with a soaring tower that could withstand the extreme heat of Kuwait City, the country’s desert capital.
Design Innovation Report | Apr 19, 2023
Meet The Hithe: A demountable building for transient startups
The Hithe, near London, is designed to be demountable and reusable. The 2,153-sf building provides 12 units of business incubator workspace for startups.
Green | Apr 18, 2023
USGBC and IWBI unveil streamlined certification pathway for LEED and WELL green building programs
The U.S. Green Building Council, Green Business Certification Inc., and the International WELL Building Institute released a streamlined process for projects pursuing certifications for the LEED green building rating system and the WELL Building Standard. The new protocol simplifies documentation for projects that are pursuing both certifications at the same time or that have already earned one certification and are looking to add the other.