Commercial property

Finding the Right Fit for CRE Conversion Projects

Marc Coe

With swathes of vacant space in office buildings and other commercial properties now seen as obsolete in the eyes of today’s tenants – a trend which, like many others, predates the pandemic but has been accelerated by her – there’s been quite a bit of conversation about how these empty or nearly empty buildings can be repurposed.

As a commercial construction company familiar with conversion and new construction projects, we know the reality is that almost any property or space can be converted to almost any permitted use with proper planning and sufficient budget, but there are certain scenarios that make more sense. than others, especially in the current context.

Three of CRE’s hottest sectors – healthcare, life sciences and residential – are driving the conversion trend, allowing developers to not only save time and money, but also environmental benefits unique to redevelopments. Yet even the strongest candidates for renovation pose risks, especially in the form of unexpected problems that could arise during construction. Below is an overview of the pros and cons to weigh when considering a conversion, an overview of the types of properties that are best suited for new uses, and important construction considerations that can make or break a project. .

To weigh the pros and cons

When it comes to conversions writ large, these projects offer a number of advantages over new builds. First and foremost, a conversion may be your best bet if you’re targeting a location where land availability is an issue, as is the case in dense urban areas like New York, or in situations where proximity to a facility existing is a priority. . The latter has dictated many of the healthcare conversions our team has managed for clients who want their new facility near an established medical campus. When vacant land is not available, repurposing an existing space or building is often the only option.

Environmental benefits are another benefit of repurposing existing properties, considering the raw materials, energy, and other resources that go into new construction. Similarly, a renovation can also be an opportunity to improve the efficiency of an older building by replacing old MEP systems; add insulation and update windows and vapor barriers to minimize energy loss; and make other upgrades based on LEED standards to improve the building’s performance from a sustainability perspective, while creating a better environment for occupants.

Of course, there are also disadvantages to reassigning a building, which must be weighed. And you might not even know what they are until you start opening the walls to see what’s behind them, especially if the detailed execution plans and maintenance records are not available. As Construction Manager, we pride ourselves on our problem solving skills and our ability to handle the unexpected, but it is important that clients understand that it is impossible to anticipate all potential issues and that something unexpected could add to the complexity of a conversion project. mention its schedule and budget. Although we have long used laser scanning as a less intrusive means of assessing existing conditions, we intend to continually increase our ratio between digital and physical survey requirements. It is imperative to review these projects on a cost/benefit basis and involve a trusted construction partner to provide information and support in assessing potential risks.

Office today, apartment tomorrow

Brian Marman

When evaluating a possible redevelopment, it is useful to keep in mind that, from a construction perspective, some types of properties lend themselves more to conversion than others, depending on how different factors and characteristics result in the proposed new use.

For example, many industry professionals talk about different ways to reallocate old office space if vacancy rates remain high. Residential is a frequently discussed new use for office buildings, and the size and location of these buildings can certainly make them good candidates. But an important factor is the footprint and configuration of the floor plates. If they are too deep, it will be difficult for light and air to penetrate behind the residential units. This problem can be solved by cutting out an interior atrium to create an open core, but this makes conversion much less straightforward than with a property where the floor plates align more directly with the residential use.

Existing hotels are another good choice for residence conversion given the density of rooms that can easily be combined into units, as well as the configuration of plumbing and other mechanical equipment providing services to individual rooms. For the same reason, these properties also work well for healthcare, a booming sector where high demand is driving developers to strategically pursue conversions in targeted locations.

In fact, we’re also seeing a trend of vacant retail businesses becoming hot targets for transitioning to medical use, such as a former Sears on Long Island that our team is in the process of converting into an outpatient facility with a large radiology follow-up. Large-area properties are incredibly attractive for this type of project as they are typically built with generous, open footprints and high ceilings, providing ample space to run medical gas, exhaust ductwork, and water heaters. other overhead systems while allowing easy access to service and maintain those systems. in the future.

As a bonus, businesses often have outdoor spaces conducive to the establishment of a “storage park” for medical gases, as well as a large car park for patients. Many also have existing charging docks, an expensive feature to build but absolutely necessary in a healthcare facility where heavy and bulky equipment, such as magnets used in imaging labs, will need to be replaced regularly over the course of the life of the establishment.

Finding a good fit for conversion into a life science property comes with its own set of parameters. Similar to healthcare facilities, these buildings need a roof or adjacent outdoor space for tanks to store various gases. Likewise, the need to run gas lines and ventilation systems to individual workstations and laboratory areas makes properties with high ceilings and open floor plates a good fit. Each lab also has fume hoods that need to exhaust the roof, so low-rise buildings like a six-story warehouse are advantageous because a specialized exhaust system won’t have to run more than a few stories. Finally, the distance from other buildings is important to take into account so that the fumes from the exhaust do not have an impact on neighboring properties.

Keys to redevelopment success

While the specific details and construction approach of each conversion project will vary, here are several overarching strategies for success that apply to any redevelopment, regardless of sector:

  • Engage your team’s experts early and often. Bring your construction manager to the table before the drawings are finalized so they can ask questions, conduct early surveys, and raise any red flags to address before construction begins. Investigative work during the planning phase is actually quite inexpensive compared to the savings that can result from understanding a building’s underlying systems before construction begins.
  • If available, study the property’s maintenance reports for the last 10 years. When was the last elevator inspection? What is the remaining life of the mechanical systems? Assessing the current condition and looking at what has gone wrong recently will give good clues as to what problems might arise during construction or in the near future.
  • Inspect the condition of structural and life safety elements. This knowledge can help you anticipate important and costly problems. Ensure the project has “good framing” by evaluating electrical systems, utility support, steel integrity, foundations and critical systems. The most important thing we do every day is to create a safe environment for our team and to deliver a safe project for our customers and the public. Understanding the potential hazards and conditions that exist is a critical step in the project planning and delivery process and will also help ensure cost and schedule for the life of the work.
  • Consider the utilities and electricity available in the existing building versus its new use. Some types of properties, like residences, have lower demand than a hospital or commercial office space, so pulling additional service from the street could be an additional cost.

As a construction professional, it is always gratifying to see a converted building. With a thoughtful approach and input from expert project partners from the start, conversions can simultaneously solve CRE needs while breathing new life into a property that might otherwise sit empty.

Mark Coe is senior vice president and director of business development and Brian Marman is senior project manager at Lendlease New York Construction.