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New Wine, Old Bottle

More owners and retailers are returning to cities for sites, trying to tap into underserved markets and capitalize on the preference of Baby Boomers and Generation Yers for urban living. The days where everything was about greenfield development are long gone.

At the same time, the decline of American manufacturing throughout the 20th century has left a wealth of former factories, industrial sites and historic buildings open to redevelopment. Many retailers are turning to landmark buildings in urban districts to make for memorable retail settings as new flagships.

That means adaptive reuse, once a niche industry, is becoming part of the lexicon for builders and developers. But adaptive reuse can be unpredictable, expensive and time-consuming. Permits and landmark issues can take years to resolve. Who knows what you'll find when you open up a floor or wall?

With urban real estate growing harder to come by, post industrial sites that municipalities are eager to revitalize make sense for developers. In New York City alone, examples include Home Depot's 23rd Street store in Manhattan, Japanese apparel giant Uniqlo's new flagship store in Soho and Bloomingdale's SoHo. But, you can find examples across the country, from Baltimore's Inner Harbor to the former Stapleton Airport site in Denver to a former GE factory being converted into a shopping center in San Jose, Calif. Another target is to go after landmark buildings, often in historic districts, where new construction is out of the question.

Another driver is rising land costs. Sprawling suburban projects use more land, meaning costs escalated faster as the housing boom drove up land prices.

“The land costs alone are turning what were profitable projects ten years ago into projects that are difficult to keep in the black,” says Alex Ferrini, an attorney with LePatner & Associates, who represents developers and owners. “Per-square-foot construction costs might be slightly higher than new construction, but when you take land costs into consideration, adaptive reuse makes your overall capital investment work.”

“With an industrial location that a city wants to rejuvenate, you can get economic incentives, be allowed to rezone or given special permits to make something happen,” says Navid Maqami, a principal at Greenberg Farrow, and director of its New York office. Greenberg Farrow is a national architectural, engineering and development consulting firm for such giants as Home Depot, Gap, IKEA, Whole Foods, and most recently, Uniqlo. “On the outskirts, they'll work with you, but they don't have to do that in Soho.”

Making a splash

In penetrating the U.S. market, Uniqlo wanted to make a splash. Manhattan's Soho district was a no-brainer, but the right location didn't come easy. By the time they found 546 Broadway between Prince and Spring Streets, Greenberg Farrow and Richter & Ratner Contracting had to condense what would normally be a year-long construction process into four months in order to meet Uniqlo's goal of opening before Thanksgiving. They were able to convert 36,000 square-feet in an occupied, landmark building into Soho's second largest retail space by the November 10 deadline.

Dogged pursuit paid off. “We were very challenged by the permitting process and the building departments,” notes Greenberg Farrow's Maqami. “We had to go through the landmarks department, to a loft board, so many different steps to get beyond the usual requirements for construction.”

Retrofitting the Uniqlo store required strengthening columns and opening vast, expansive holes in the floors to execute the loft-style design by the Japanese architectural firm, Wonderwall. Exposed brick and ventilation add to the effect. But, Uniqlo didn't want to give up floor space for mechanical rooms to house HVAC and electrical. “We had to hang them,” says Maqami. “In order to do that, we had to support them, which means a lot of structural gymnastics for things the customer can't even see, and that can take up 30 to 40 percent of your budget.”

Ultimately, the expensive alterations were worth it. “Uniqlo's coming to Manhattan wasn't purely economic,” says Maqami. “They wanted to establish a flagship presence, and they were prepared to live with the extra costs involved.”

Ibex Construction worked with Greenberg Farrow on another retrofit, the 23rd Street Home Depot — the home improvement retailer's first store in Manhattan.

“This is a historic building with a 200-foot-long cast-iron façade, and old infrastructure,” says Ibex President Andy Frankl. “We went from 100 pounds to 700 pounds loading on the floors, so we had to be acrobats, holding all the infrastructure up, with 500,000 square feet of office space above it. Taking out the steel structure was like playing pick-up sticks.”

One of the big hassles with adaptive reuse comes in permitting and getting the building's zoning changed from its previous use to a new one. This is especially trying when you are dealing with a building that has landmark status.

Expect boards to work at their pace, not yours, verifying that a redesign preserves the interior or exterior character of the building, if not both. “Signage is an issue,” says Maqami of landmarked reuse. “They aren't making concessions for you.”

Be ready for anything

By far the most consistent advice is to prepare and budget for surprises, or what Frankl calls the “archeological expedition syndrome.”

Old buildings often have a century or more to collect dark secrets. Original drawings, if you are lucky enough to have them, may mislead or lie. Hazardous materials, like asbestos and lead paint, are common finds. So add 10 percent to 15 percent to project construction budgets for contingencies and run inspections prior to committing.

If surprises accumulate, you get what Ferrini calls, “death by a thousand pinpricks.” “So the intelligent developer is going to invest much more time and money in exploration and investigation of an existing building before getting started.”

Hidden surprises

With Forest City's conversion of Stapleton, Denver's former airport and the largest urban redevelopment in the country, the M.A. Mortenson Company is tearing up and recycling 1,100 acres of concrete runways and roads, much of it two feet thick. According to Mortensen project engineer Steve Chambers, they've encountered lots of junk concrete and pipes not on any plans, as well as heaps of glycol. The wing deicer, similar to anti-freeze, seeped through the runaways and had to be processed or removed.

Michael Liu, a principal of the Boston-based Architectural Team, who has completed nearly 300 adaptive reuse projects, agrees that unforeseen conditions are the biggest obstacle for most adaptive reuse projects, but suggests that experience can help with the detective work. In Boston, Liu adapted a municipal building, built in 1923, into a mixed-use development. “The design drawings were beautiful and well-preserved, but tests showed the concrete to be half the strength as noted on the drawings and nearly double the thickness. It was built in a period of corruption, so you could imagine that the concrete got watered down while someone looked the other way.”

Despite the hassles and surprises, the pros far outweigh the cons with adaptive reuse “if you assume that building materials will continue to grow more expensive, adaptive reuse will only grow more attractive,” Liu says.

A bit of old world charm is worth the price. “It costs more in terms of design and sometimes with construction to transform an existing structure, so it isn't as easy as it first sounds,” says Maqami of adaptive reuse. “But you can't tear down a building and put a one-story Home Depot in Manhattan. You have to plug into the urban fabric.”

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