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
| Dec 13, 2010
Energy efficiency No. 1 priority for commercial office tenants
Green building initiatives are a key influencer when tenants decide to sign a commercial real estate lease, according to a survey by GE Capital Real Estate. The survey, which was conducted over the past year and included more than 2,220 office tenants in the U.S., Canada, France, Germany, Sweden, the UK, Spain, and Japan, shows that energy efficiency remains the No. 1 priority in most countries. Also ranking near the top: waste reduction programs and indoor air.
| Dec 7, 2010
Hot rumor: Norman Foster designing Apple’s new campus
Lord Norman Foster, reportedly has been selected to design Apple’s new campus in Cupertino, Calif. If the news is true, Foster is a good match for Apple say experts. Foster built his celebrity by marrying big gestures to technological wizardry. And, unlike some starchitects, he has glommed onto the environmental revolution—something Apple has made a point of embracing, too.
| Dec 7, 2010
Product of the Week: Petersen Aluminum’s column covers used in IBM’S new offices
IBM’s new offices at Dulles Station West in Herndon, Va., utilized Petersen’s PAC-1000 F Flush Series column covers. The columns are within the office’s Mobility Area, which is designed for a mobile workforce looking for quick in-and-out work space. The majority of workspaces in the office are unassigned and intended to be used on a temporary basis.
| Nov 16, 2010
Calculating office building performance? Yep, there’s an app for that
123 Zero build is a free tool for calculating the performance of a market-ready carbon-neutral office building design. The app estimates the discounted payback for constructing a zero emissions office building in any U.S. location, including the investment needed for photovoltaics to offset annual carbon emissions, payback calculations, estimated first costs for a highly energy efficient building, photovoltaic costs, discount rates, and user-specified fuel escalation rates.
| Nov 3, 2010
Public works complex gets eco-friendly addition
The renovation and expansion of the public works operations facility in Wilmette, Ill., including a 5,000-sf addition that houses administrative and engineering offices, locker rooms, and a lunch room/meeting room, is seeking LEED Gold certification.
Office Buildings | Nov 3, 2010
11 tips for office renovation success
Only after you’ve done your homework on these critical success factors can you determine if you can produce a successful office renovation project for your client.
| Nov 2, 2010
11 Tips for Breathing New Life into Old Office Spaces
A slowdown in new construction has firms focusing on office reconstruction and interior renovations. Three experts from Hixson Architecture Engineering Interiors offer 11 tips for office renovation success. Tip #1: Check the landscaping.
| Oct 13, 2010
Editorial
The AEC industry shares a widespread obsession with the new. New is fresh. New is youthful. New is cool. But “old” or “slightly used” can be financially profitable and professionally rewarding, too.
| Oct 13, 2010
Modern office design accentuates skyline views
Intercontinental|Exchange, a Chicago-based financial firm, hired design/engineering firm Epstein to create a modern, new 31st-floor headquarters.
| Oct 13, 2010
HQ renovations aim for modern look
Gerner Kronick + Valcarcel Architects’ renovations to the Commonwealth Bank of Australia’s New York City headquarters will feature a reworked reception lobby with back-painted glass, silk-screened logos, and a video wall.
