Deep Due Diligence Key To Successful Adaptive Reuse Projects
Putting old buildings to good use is way more complicated than what people might imagine. It goes beyond cleaning them up and finding tenants. You have to expect the unexpected.
And just because the price is right, that does not mean the building is right for the project envisioned.
Shift Workspaces founder Grant Barnhill recalls buying the old Cathedral High School for $60/SF. He had planned to redevelop the property into shared workspace — a plan that did not work out, so he ended up selling the building. If he had done more thorough due diligence, Barnhill said he probably would not have purchased the building.
“Adaptive reuse projects require a lot of due diligence,” Barnhill said during Bisnow’s Denver Office of the Future event last week. “It goes way beyond a general inspection. We look at the use and get a detailed structural report. We dive into a lot of work you might think you can do later.”
Urban Ventures President Susan Powers, who searches for neighborhoods that have not quite been discovered, said when she was considering buying the building that is now Steam on the Platte, it had not been occupied by a legitimate business since 1965.
“Steam was a very successful illegal pot-growing business and hangout for Harley-Davidson riders,” she said. “There were lots of pigeons in the building.”
When Urban Ventures really delved into the property during its due diligence, it uncovered nine underground tanks, including two filled septic tanks from when the property was not tied into the city sewer system and seven with petroleum products. Fortunately, none of them had leaked so Urban Ventures incurred just the cost of removing them.
“No matter what you find, there’s always something else you don’t know about,” Powers said.
In terms of what tenants are looking for in office space, Barnhill said these days it goes beyond square feet per person, which ranked No. 7 in a recent study. More important are things like sound privacy, visual privacy, thermal comfort, air quality and the adjustability and comfort of the furniture.
“We study this consistently and try to hit as many of the top 20 as we can,” Barnhill said. “Light is very important — and the ability to work outside.”
Powers said tenants at Steam put health and wellness above the libations that are offered in many office spaces being developed today.
“Our first tenant said, ‘We don’t need beer here, we need a yoga room,’" Powers said, noting that the building also has showers and bike storage and is dog-friendly.
Unico Properties recently renovated a 24-story midcentury modern high-rise, The Denver Club Building, to bring it to a level that meets tenants needs in the 21st century. One of the amenities it added was a bowling alley and lounge with WiFi and a TV.
“If you just need to get out of your office and work in a different environment, you have the ability to do that,” Unico Properties Vice President and Regional Director Austin Kane said. “It’s driven by demand in the workspace.”