How to Make Your Old Building New Again
Investors are finding value in their commercial real estate investments in 2010. They're capturing tenants that add value to their properties through lease-up, low vacancy, and renewed appreciation. One investor, considering a new direction for his property, called us looking for guidance on how to take his empty building and realign it with market demand in today's commercial real estate market.
His building is about 100 years old and has been home to Boston Baked Beans, a curtain factory, a top-secret World War II dummy equipment manufacturer responsible for D-Day invasion preparations, as well as home to an innovative high-tech silicon technology manufacturing company. Today, the building has had renovations completed inside, has been empty for a few months, but has some redeeming improvements that make it somewhat unique.
Over the years, the owner installed 2 clean rooms, a wet lab, power to handle heavy manufacturing equipment, and interior common area renovations that bring out the building's historical appeal, while offering amenities such as a fitness room, wired meeting spaces, and flexible office options.
In our meeting, we discussed the viability of the small to mid-size life science, high-tech, and bio-tech companies in Massachusetts and how they face a major dilemma--access to capital and the difficulty in securing and building out space to specs that suit their research and development requirements. Most can't afford to build clean rooms and wet labs and consequently moonlight at the offices of other companies that lease their rooms and labs at a discount. Additionally, many companies prefer the inner 128 market because of access to public transportation, Victorian homes, and ability to walk to restaurants, hiking trails, banks, boutiques, and cafes. This building's location matched all of those requirements and offered easy access to Cambridge and downtown Boston.
We conducted a market analysis using geospatial information systems, demographic, and NAICS analysis and concluded that the solution to meeting this location and space demand was to offer a flexible office solution that provided a collaborative work environment where these companies could forgo the cost of building their own clean room and lab space. They would lease offices and then purchase time on an as needed basis in the building's clean rooms and lab space to run their experiments and conduct their research and development activities. Then as the companies grow, they have the option to expand in the building while drawing on its resources until they're large enough to move into larger spaces and have the capital to build out their facilities. What's more, they would pay more dollars per square foot than a single user and provide the owner with a hedge against future high vacancy risk.
To position the building, we're naming it. We've built a story around the innovative successes that companies have experienced throughout the building's 100 year history as well as communicated a founding value that expresses the belief that through collaboration and flexibility, we reach greater success. To boot, an exterior renovation will be done to reskin the building and add new signage branding its new image and name.
One challenge this owner will face will be the added management of a multi-user building where tenants have access to more common areas than conventional research and development buildings provide. But instead of trying to locate a single tenant for the entire building, where competition is strong and other buildings offer better functionality of access, parking, and construction, this building competes in a class of its own by repackaging its space to meet the demands of today's start-up and high-growth focused market. We're looking forward to filling it and watching its community grow.
Get free weekly email updates of this blog.
About the Author: Jeremy Cyrier, CCIM is the founder/principal of MANSARD Commercial Properties and member of the CCIM Institute faculty. He delivers thoughtful, large scale commercial real estate solutions to the individual challenges owners and tenants face. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.
Get free updates sent straight to your email box by filling in your name and email below.
