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
| Oct 2, 2014
Budget busters: Report details 24 of the world's most obscenely over-budget construction projects
Montreal's Olympic Stadium and the Sydney Opera House are among the landmark projects to bust their budgets, according to a new interactive graph by Podio.
| Sep 30, 2014
With its 'stacked volumes' scheme, 3XN wins bid to design high-rise in Sydney
By dividing the 200-meter building into five separate volumes and placing atria throughout each volume, the spaces become smaller, more intimate social environments, according to the Danish architects.
Sponsored | | Sep 25, 2014
Architects transform warehouse into office space while preserving its historic nature
When it came time for CSHQA, an award-winning, full-service architecture and engineering firm, to move office locations, they didn’t need to look far. The 20,000-square-foot warehouse was not only a mere three blocks away, its renovation would be an ideal demonstration piece to show existing and potential clients.
| Sep 25, 2014
Look to history warily when gauging where the construction industry may be headed
Precedents and patterns may not tell you all that much about future spending or demand.
| Sep 24, 2014
Architecture billings see continued strength, led by institutional sector
On the heels of recording its strongest pace of growth since 2007, there continues to be an increasing level of demand for design services signaled in the latest Architecture Billings Index.
| Sep 23, 2014
Cloud-shaped skyscraper complex wins Shenzhen Bay Super City design competition
Forget the cubist, clinical, glass and concrete jungle of today's financial districts. Shenzhen's new plan features a complex of cloud-shaped skyscrapers connected to one another with sloping bridges.
| Sep 23, 2014
Designing with Water: Report analyzes ways coastal cities can cope with flooding
The report contains 12 case studies of cities around the world that have applied advanced flood management techniques.
| Sep 22, 2014
4 keys to effective post-occupancy evaluations
Perkins+Will's Janice Barnes covers the four steps that designers should take to create POEs that provide design direction and measure design effectiveness.
| Sep 22, 2014
Sound selections: 12 great choices for ceilings and acoustical walls
From metal mesh panels to concealed-suspension ceilings, here's our roundup of the latest acoustical ceiling and wall products.
| Sep 15, 2014
Ranked: Top international AEC firms [2014 Giants 300 Report]
Parsons Brinckerhoff, Gensler, and Jacobs top BD+C's rankings of U.S.-based design and construction firms with the most revenue from international projects, as reported in the 2014 Giants 300 Report.