Much has been discussed about renovating empty and distressed office buildings into viable multifamily dwellings. But successful adaptive reuse is more than targeting an empty office building and commencing renovations. Recently, Waterton’s David Schwartz spoke in depth about the realities of these renovations, as well as his take on the multifamily sector, in general. Schwartz is the keynote presenter at a upcoming conference focusing on Multifamily & Adaptive Reuse Trends .
When it comes to effective adaptive reuse, two main challenges exist: not all buildings work for this purpose due to floorplates that may be too big or expensive mechanical infrastructure; also natural light can be an issue; plus location matters since many of these buildings are located in central business districts without residential amenities like parks or nightlife. To overcome this challenge municipalities may have to invest more than economic incentives such as accelerated entitlements and tax abatements/TIF districts for any kind of adaptive reuse project to work successfully.
As far as outlook for multifamily goes – values peaked around Q1 2022 but have declined anywhere from 15% – 20%, due mainly cap rate expansion with less debt capital available along with higher rates making fewer transactions possible while seller cap rates move up slightly while buyer cap rates remain even higher creating a classic bid-ask spread situation between buyers and sellers alike.. With strong rent growth seen throughout 2021/2022 now seeing base rents go negative could put upward pressure on cap rates exacerbating bid-ask spread further yet there still remains equity capital out there so profoundly distressed deals aren’t expected during this downturn period though good investment opportunities should arise when some stressed assets become available for sale over next three years given loan maturities coming up within that timeframe..
Meet David Schwartz along with other experts at Connect Midwest: Multifamily & Adaptive Reuse Trends taking place June 13th 2023 at W Chicago City Center where attendees will gain insight into current trends impacting both sectors plus strategies needed going forward when it comes adapting existing structures into new uses suitable today’s market demands Click herefor more information/registration details
