Like any renovation project, repurposing a building is a financial decision. Adaptive reuse can increase the income from properties that currently have few occupants, by creating spaces that are more likely to be rented.
Hotels, offices and shopping malls are among the building types that are currently affected by low occupancy. The drop in tourism and business travel has reduced hotel room occupancy, and videoconferencing is now an alternative to traveling for meetings. Working from home has reduced the need for office space, while e-commerce is displacing physical stores.
At the same time, the demand for warehouses and data centers has increased. Warehousing services are necessary to support e-commerce, and data center services are necessary for both e-commerce and remote collaboration.
The demand for affordable housing is always rising, especially in urban areas like NYC. In addition, many employees who work from home permanently are looking for larger apartments where they can set up a personal office.
Adaptive reuse makes sense from a business standpoint when you have a vacant building that can be converted into a high-demand occupancy without major changes. For example, repurposing hotels into apartment buildings is relatively simple, and also repurposing shopping malls into warehouses. On the other hand, converting a vacant hotel into a warehouse is more difficult, since the required layout is very different in each case.
If you plan to convert an office building or hotel into a residential building, Nearby Engineers New York Engineers offers you a free financial analysis along with our design services.
In 2020, the Federal Reserve lowered the federal funds rate to 0.00% - 0.25%, as an economic stimulus to mitigate the impact of COVID-19. This measure has lowered interest in the entire banking sector, providing a great opportunity to finance an adaptive reuse project with a loan. For example, the prime rate offered by banks to their best customers is only 3.25% as of early 2021.
The low interest rates currently available can save developers thousands of dollars over time. The following example is very simple, but it demonstrates the benefit of low interest:
Low interest rates also provide an excellent opportunity to finance energy efficiency measures, making the repurposed building even more attractive for tenants. For example, a warehouse that operates 24/7 can achieve significant savings with LED lighting.
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