Repurposing real estate involves identifying alternative uses for owned assets that offer greater potential returns in the short to medium term. This proactive approach is essential to staying ahead of market trends and ensuring a building’s sustainability and relevance.

We have outlined several opportunities for repurposing retail properties to adapt to the changing real estate landscape. Let’s dive into each opportunity in more detail:

• Warehouse and Distribution Space: The surge in online shopping has significantly increased the demand for warehouse and distribution centers. Repurposing large vacant retail spaces, such as department stores, into fulfillment centers or last-mile delivery hubs for online retailers can be a lucrative move for property owners. These conversions can cater to the growing needs of e-commerce companies to have strategically located distribution centers to meet customer expectations for fast and efficient deliveries.
• Data centers and company headquarters are other potential uses for repurposing vacant properties. As businesses rely more on digital operations and data storage, the demand for data centers has risen. Converting retail spaces into data centers can meet this demand while also capitalizing on the existing infrastructure and location advantages of retail properties.
• Mixed-Use Property: The concept of mixed-use developments has gained popularity in recent years. Repurposing retail properties into mixed-use spaces that combine commercial, residential, and sometimes even recreational or healthcare facilities can create diversified income streams for property owners and reduce investment risk. Mixed-use properties can attract a broader range of tenants and residents, creating a vibrant and dynamic environment. For example, leasing retail spaces to healthcare providers to use as medical facilities or clinics can meet the increasing demand for healthcare properties, especially with an aging population. This can prove beneficial for both the healthcare providers and the property owners.
• Apartment Conversions: With the growing need for housing, apartment conversions present a compelling opportunity for retail property owners. Transforming underutilized retail spaces into residential apartments can help meet the demand for housing in areas where there might be a shortage of available land for new construction. This transformation also aligns with the trend of urbanization and the desire for mixed-use urban environments, where people can live, work, and play in close proximity.

In all these repurposing strategies, conducting detailed market research, understanding local and regional demographics, and analyzing the economic environment are crucial steps.

The process typically involves the following steps:

• Assemblage and oversight of the project design team: A successful repurposing strategy all begins with the team behind the project. This team will include, but is not limited to, master land planners, appraisers, CEQA advisors, land use attorneys, construction managers, and financial analysts.
• Drafting of conceptual repurposing plans: We work with world-class architectural firms to develop concept plans that serve the highest-and-best use for each site. Each repurposing site has its own unique aspects and, as a result, will yield different plans/uses dependent on its location, demographics, existing condition, etc.
• Underwriting the investment opportunity: Based on the concept plans drafted, our underwriting team will conduct a survey of the market to ensure that demand exists and the market can absorb the new proposed uses. A summary with detailed, risk-adjusted analyses will be provided to give property owners a full understanding of the potential of their repurposed property.
• Management of the bidding process: Once a concept plan is in place and base financials are established, we will market the opportunity to developers, operators, and construction firms to get the most competitive pricing to deliver the highest value/returns to property owners.
• Creating a lease termination strategy: As property owners repurpose their properties, it is imperative to keep cashflow continuous or structure cash-out termination outcomes up until construction is ready to break ground. With our seasoned team of consultants and brokers, we can work with tenants to create mutually beneficial results that allow for the least amount of downtime in the repurposing process.
• Managing the entitlement process: As plans move from concept to detailed building plans and reality, our team of entitlement experts will carry plans through municipal authorities from application and revisions to successful entitlements and permits.

It’s essential for property owners to stay ahead of market trends and anticipate changing needs to remain relevant in the real estate market. Proper data analytics and a proactive approach with the right team can lead to successful repurposing outcomes that benefit both owners and tenants.