In many ways, the COVID-19 pandemic has accelerated transitions that were already occurring in commercial real estate, such as advances in technology and e-commerce, changed spending habits, shifting interests and preferences of younger generations, remote work, and the growing need for health care.
As such, adapting and repurposing commercial real estate assets to suit new and different needs will be the core focus for investors, owners and operators in the months and years to come. This shift will require visionary thinking and strategic, opportunistic capital investment.
Below are insights into how some of the biggest names in the industry are seizing upon this opportunity to transform the commercial real estate landscape and reshape it to their advantage:
From an investment standpoint, rent collections and financial performance have been surprisingly strong, making multifamily a resilient and highly desired asset class among investors. The COVID-19 pandemic has driven strong asset prices and dynamic location and technology adaptations among developers and owners.
“I think we will see outdated, obsolete assets being repurposed,” said Michael McMahon, executive vice president of portfolio management and director of tax at RXR Realty. “For instance, some of the older Class B office buildings might be ripe for conversion to residential — particularly if that residential includes a rent-stabilized component, as the recently passed NYC Climate Mobilization Act includes an exemption for buildings with rent-stabilized units.”
Many are focused on how to manage the retail sector of real estate, but conversions and adaptations in the hospitality sector are also seeing renewed interest.
“In this instance, the current use is not maximizing the potential of the underlying real estate,” said Evan Podob, a partner at Scenic Investments. “We can create additional value by replacing the existing building with a vibrant student community with amenities for our student users, helping to enhance student life and connections to the school and the community. Our detailed and extensive development process helps us to recognize properties that might have a higher and better use for their future.”
Bill Edwards, executive vice president of core holdings at Rockefeller Group, said: “We view our restaurant tenants as in-building amenities. We want them to succeed and we’ve been working to help them adapt to all the new and shifting requirements. We have restaurant tenants that have remained open since March — even when they were restricted to take-out. We’re proud of what they’ve been able to do, and we’ve been working with anyone who has asked to accommodate outdoor dining, with three restaurants operating on our plazas right now.”
Read the full Commercial Observer article HERE.
Learn more about Hatteras Sky and our adaptive re-use projects HERE.