Grabbing the Lucrative Adaptive Reuse Market

By William J. Angelo

As young professionals and retirees become dissatisfied with sterile suburban lifestyles, they increasingly are moving into and revitalizing nearby city centers. For design-builders, taking a second look at older urban buildings can provide a creative and rewarding market. And when the adaptive reuse of these structures is combined with design-build project delivery, it can become a clear choice over new construction.

“I encourage those thinking of adaptive reuse to use design-build delivery,” says Dorwin A.J. Thomas, a Ft. Myers, Fla., architect and chairman of the American Institute of Architects Design-Build Knowledge Community Advisory Group. “I’m adamant. It makes sense 100%.” Thomas notes that design-build’s single- source responsibility eliminates coordination problems and offers faster schedule-driven delivery, which saves money and permits faster project utilization.

Instead of demolishing older buildings in urban areas, developers are reusing them, sometimes for new purposes. Such reuse can include converting offices to condos, big-box stores to schools and hotels to luxury suite structures.

“That’s what’s screaming down here,” says Glenn B. Giles, president of ARC Avenue Inc. and its construction affiliate, Giles Construction Group, both of Hollywood, Fla. “We’re as busy as we’ve ever been.” Giles designs and builds projects in the commercial, hospitality, residential and industrial sectors, but his main forte is adaptive reuse of residential structures.

A practicing architect for 20 years, Giles also did some construction management but found that he was making less money and loosing more project control in traditional bidding. He also was fed up with delays and contractor number games. “When we work with a client and develop a relationship, everyone is happy until the contractor changes the equation,” he says. “There is a big disparity in work, liability, responsibility and reward versus a general contractor, and it’s all stacked in the contractor’s favor.”

About 10 years ago, Giles decided to save his clients money and give them a better product while bringing in more business for himself by starting a construction firm and going design-build. Now his two firms pull in about $12 million annually, with 60% of work coming from multi-family rehabs.

According to Giles, the reuse market is huge in southern Florida. With numerous underutilized buildings and low interest rates, buying instead of renting is an attractive option. “There is no more land left. We have urban sprawl and are now going through a second cycle on existing structures,” he says.

There are many advantages to reuse. Major structural elements and utilities already are in place, there generally is community support, projects are environmentally friendly and values can skyrocket after completion. “Usually, reuse is less costly than demolition, new zoning density hassles and new construction requirements,” Giles says.

For a fixed fee, participation in savings and no guaranteed maximum price, Giles will gladly take on reuse projects. He currently has an eight-story warehouse-to-housing conversion project and a single-story warehouse conversion into two-story offices pending in Fort Lauderdale and a five-unit Miami penthouse in design. His firm also is converting Pine Crest, a 350-unit rental property in downtown Fort Lauderdale, into 260 luxury units at a cost of $15 million. Property values already have gone from $15 million to $60 million.

Pine Crest is owned by Terragon Realty Investors Inc., New York City, which has property assets of over $1 billion. “Design-build is efficient and you can do it on the fly,” says James R. Helman, Terragon vice president of development in Fort Lauderdale. “We didn’t want to lose a hot market, so with the right team, going design-build was the only way to go....I love the design-build process.”

Design-build is very efficient in rehab projects, particularly when rehabbing apartments into condos, because certain structural components already are in place and you can design and build around them quicker for a faster project turnaround, says Helman. “Design-build should always be considered in adaptive reuse projects,” he says. “It’s quicker, cheaper and more effective.”

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