Shifting Opportunities
While the bulk of office space in the U.S. needs to consider its competitive positioning, not all is lost for those facing headwinds. Owners and investors focused on proactively addressing such challenges will be able to recover value and generate returns. By exploring opportunities to reposition or repurpose, no shortage of opportunity exists with the right partners for strategy, funding and execution. Through case studies and deep dives into the sectors such as life sciences, healthcare and multifamily, Obsolescence Equals Opportunity explores alternatives for repositioning and repurposing.
Repositioning
Repositioning strategies are among the least costly and most efficient strategies for bringing an obsolete office property up the value and relevance curve. However, it does require experience and insight to ensure any investments are the right size and in the right areas to meet tenant demand in the local market.
Repurposing
Depending on the market, submarket or property, an asset may not be a strong candidate for repositioning strategies, either due to the competitive landscape or due to the building’s physical characteristics. Owners of assets that are candidates for repurposing should thoroughly estimate project costs, demand-side potential and exit value assumptions in the next part of the evaluation phase.
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The Vacant Behemoth
Total Budget $20 Million
- Transformed quality of space and amenities to attract tenants
- Commitment to quality and detail was key throughout execution
- Common area amenities and alternative work areas were appealing to tenants
Office Campus to Industrial
1984-vintage office asset purchased for $16 million ($55/sf) later sold for $128 million ($441/sf)
- Extensive renovation transformed the property from an office for Bank of America to a distribution warehouse
- Fully occupied by Amazon through 2036 with 2% escalations on triple net basis
High-Rise Mixed-Use
The 1.4 msf office building sold for loan loss of $107 million, purchased for $4.5 million in April 2022.
- New plan to convert the tower into apartments and hotel
- Adding other amenities while also keeping a portion of the tower as office space
- Workplace strategy increased marketability of multi-tenant floors
1980s, 3-building Full-Repositioning Play
Total Budget $45 Million
- Total renovation and repositioning of 3 buildings
- Focused on amenitization and activation of space
- Beyond renovation, created a significant tenant experience/community management program
High-Rise Office to Partial-Clinical Office
Total Budget $10 million, Chicago’s iconic Hancock Tower
- Convert 4 floors to healthcare uses while reconfiguring components of the asset to accommodate a surgery center and other clinical uses
- Now in lease-up witnessing strong interest
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