In the wake of the Great Recession, development of new commercial buildings remains scarce, in large part a result of lack of demand and extremely tight financial markets.
Another effect of the Great Recession is that more commercial buildings have been vacated as several companies went out of business.
These conditions could set the stage for an increase in adaptive reuse of existing commercial buildings. Redeveloping vacant buildings can be an attractive option for developers that obtain vacant structures at a low cost.
Adaptive reuse is especially appealing for properties in high-quality urban locations, where vacant parcels are more difficult to find than properties with vacant or under-used buildings, said David Ferron of Milwaukee-based DBD Enterprises. The cost of buying a quality urban location, plus tearing down an old existing building, then building a new structure is often too high to make the project worthwhile. Buying the same property and redeveloping the existing building is often a better option, he said.
“You can’t afford to tear down a 50,000- to 60,000-square-foot building and then build something new to replace it,” Ferron said. “There’s a lot of vacant buildings around. You have to take advantage of them.”
Ferron is in the midst of the Haymarket Square project, a redevelopment of two blocks northwest of North Sixth Street and McKinley Avenue on the northwestern edge of downtown Milwaukee.
The centerpiece for the project is a 67,000-square-foot building. The building was formerly used as a garage for Milwaukee Journal Sentinel trucks. Santa Ana, Calif.-based Corinthian Colleges Inc. recently opened an Everest College campus in the 44,000-square-foot first floor. Everest College has 38 employees working at the campus and plans to have 75 to 100 employees there by June of 2011.
DBD Enterprises is seeking a tenant to lease out the building’s 23,000-square-foot upper floor, which features downtown skyline views, and the company will make improvements to three other smaller buildings at the site and seek tenants to fill them.
The location near McKinley Avenue, a major entry-way to downtown, makes the property attractive for a redevelopment project, Ferron said.
“It’s like anything in real estate – location, location, location,” he said.
DBD spent $3 million to redevelop the former Journal Sentinel garage building, and interior improvements for Everest College cost another $3 million. The structure, built to handle the heavy trucks, was in excellent condition, Ferron said.
“You couldn’t afford to build a (new) building this solid,” he said.
Older buildings often have additional appeal, a unique character that new buildings cannot match, said Kurt Van Dyke of Cassidy Turley Barry, which is marketing the Haymarket Square buildings for DBD Enterprises.
“I think the atmosphere of an older building is better,” he said.
Other major adaptive reuse projects in various stages of development in the Milwaukee area include:
The University of Wisconsin-Milwaukee’s plans to redevelop the former Columbia St. Mary’s Hospital near its main East Side campus. UWM has agreed to purchase the hospital for about $20 million. Columbia St. Mary’s is vacating the facility as it consolidates those operations into the expansion of its campus at Prospect and North avenues. The hospital campus near UWM has seven buildings with a total of 828,000 square feet of space, a 5-story parking structure with 788 parking spaces and surface parking with 174 spaces. UWM has not identified its special plans for the hospital property. A master plan for the UWM campus outlined a variety of potential uses for the Columbia St. Mary’s property, including student services and academic/instructional space.
Milwaukee-based Zilber Ltd. continues to work on transforming the former Pabst Brewery in downtown Milwaukee into a mixed-use urban neighborhood called The Brewery. So far four buildings have been redeveloped into three office buildings and an apartment building. In addition, another developer, Jim Haertel, is working separately to redevelop the former Pabst headquarters, gift shop and Blue Ribbon Hall. He has opened a new gift shop and bar in the building. Several other buildings in the former brewery complex remain vacant.
The Forest County Potawatomi Community of Wisconsin plans to redevelop the 11-acre former Concordia College campus, which includes several historic buildings, located southeast of West State Street and North 33rd Street, and the historic Lion House building at 3209-15 W. Highland Ave. on Milwaukee’s west side. The project will include the demolition of three non-historic buildings, renovation or preservation of seven existing buildings and construction of two new buildings. The Potawatomi plans to relocate its tribal government offices and the corporate headquarters for the Potawatomi Business Development Corp. and the FCPC Foundation to one of the buildings in the complex. Other buildings would be used for a relocation of the Spotted Eagle High School and for general office, research and development and light assembly business operations in office and flex space. The two new buildings would be the third and final stage of the redevelopment project.
Ray’s Indoor Mountain Bike Park, located in Cleveland, Ohio, is building its second location in an 110,000-square-foot former Menards store at 8365 N. 76th St. on Milwaukee’s northwest side. The building is owned by Milwaukee-based Mallory Properties. The Milwaukee Ray’s Indoor Mountain Bike Park is expected to open in November. It will provide indoor trails on a variety of terrains for beginner, intermediate and advanced skill mountain bike riders. The facility will also have a street park, similar to a BMX or skate park but geared for mountain bikes.