The popularity of urban centers for living and working has produced some major shifts in the CRE market. Companies are looking for amenity-rich spaces in buildings full of character to appeal to top talent, and mixed-use city neighborhoods are hot in markets all over the country.
Existing industrial buildings are being converted into residential lofts and creative office spaces. These projects make sense considering the higher costs of ground-up development as well as the fact that refurbished older buildings have a cool factor that draws tenants like bees to honey. Some markets are seeing particularly high activity in this area.
Industrial space is ideal for housing “creative” companies. Their offices include production space for work like advertising, communications, software design, architectural services, entertainment, engineering, photography, film distribution, and all manner of design. These companies tend to flock together, so industrial conversions often sweep through an area in response to demand.
In the Los Angeles market, Silicon Beach is home to many such companies housed in formerly industrial spaces. The supply of these spaces in cities like Venice and Santa Monica is being depleted, and developers have begun to look further south. In El Segundo, the Smoky Hollow area has seen the redevelopment of more than 40 mid-century industrial buildings into creative office space.
Repurposing existing industrial buildings has taken off in the New York market as well. Many of these projects have been undertaken in Queens, especially Long Island City; in Sunset Park and other parts of Brooklyn; and in the Bronx.
In Brooklyn’s DUMBO section, a project dubbed “DUMBO Heights” converted a collection of mid-rise buildings into retail space and offices housing companies like WeWork and Etsy. In the Port Morris section of the Bronx, a six-story, 84,650 square foot industrial building at 780 East 13th Street was purchased earlier this year, with plans to convert it into creative office spaces.
The iconic Marshall Fields warehouse is the site of a major redevelopment project in Chicago, where the first tenants, which include a Studio41 home design showroom, Deal Genius, Cermak Fresh Market and 84 live-work apartments, are already moved in. The six-building property covers 1.5 million square feet. A $60 million project will convert the facility to mixed-use space, dubbed The Fields. The plans call for business, retail and residential tenants, and will include 700 indoor parking spaces.
In several areas of the city, many older industrial facilities with large floor plates are being reborn for office tenants, primarily tech companies. Many of the warehouses in the Fulton Market area have already been overhauled, and Goose Island’s inventory of large industrial buildings are being made over to meet the needs of new commercial tenants.
The popularity of adaptive reuse of existing industrial properties continues, enabling developers to capitalize on the unique features of those structures, save on costs, and in many cases, preserve architectural history. Larger footprints create a wider range of design options to accommodate mixed-use projects.