Northeast Real Estate Business

NOV-DEC 2015

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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Page 43 of 64 Northeast Real Estate Business • November/December 2015 • 43 Updating Building Systems to Meet New Use Depending on the proposed new use, buildings systems may also need to be updated (or replaced in their entirety) to meet current code and de- mands of the new use. The life span of a building's infrastructure is typically 30 years, which means that for most adaptive reuse projects, electrical wir- ing, plumbing, sewer and sanitary lines, ventilation ductwork, or other essential operating systems are due for an upgrade. New applications, such as air conditioning, fre suppres- sion, information technology and se- curity systems, may need to be added. Water, sanitary and fre suppression lines may also need to be serviced to accommodate upgraded electrical and mechanical systems. The property owner must also in- corporate technology into the project design to meet continually increasing demands for smart buildings, particu- larly in the area of wif and data con- nectivity and building operation/au- tomations. Some systems are eligible to have portions replaced at a minimal cost, but signifcant changes in loads or really outdated networks may re- quire a full removal and reinstalla- tion to meet new demand and codes. The potential economic impact of this must be understood at the very begin- ning of the project. Due Diligence Costs Working with an old building brings a greater number of unknowns and, as a result, a very thorough due dili- gence process is required to confdent- ly assess risks. Accordingly, develop- ers must budget substantially more for due diligence in an adaptive reuse project than in a typical ground-up project. To avoid surprises, develop- ers must make sure to closely review all due diligence reports and work with consultants with proven experi- ence working with historic buildings. Many multifamily developers look at contingency reserves of at least twice what they would anticipate for a ground-up community to insulate. Obtaining cost estimates can provide an accurate understanding of the proj- ect's viability and the ROI that can be expected. Financial Incentives There are many federal and local in- centives available that aim to encour- age the preservation and re-use of ex- isting, historic structures. The added risk and cost associated with adaptive reuse projects means that their eco- nomic feasibility often relies on such incentives. Historical Preservation Tax Credits can be signifcant, although they can be diffcult to obtain because very strict regulations apply for fa- çade preservation. Many states also have urban rede- velopment programs or brownfeld redevelopment incentives that can be utilized to offset costs. In addition, utility or government-sponsored in- centives are available to encourage the use of energy conservation and sustainable design practices. Optimizing Returns Ideally, the objective of an adaptive reuse project is to meet the fnancial needs of the owner/developer and the functional needs of consumers and occupants through design that addresses the nuances unique to local communities. Market forces are increasingly driv- ing investments in sustainability and technology: tenants and investors are demanding upgrades in IT, MEP and energy effciency — and as a re- sult, greener and smarter buildings yield better tenant attraction/reten- tion, lower operating costs and higher rental rates. Adaptive reuse projects present a unique opportunity to in- corporate smart design, sustainabil- ity and energy upgrades or structural strengthening to improve the asset's appeal, its effciency, safety, and com- fort, and therefore its marketability and value. At the most basic level, adaptive re- use projects are the ultimate represen- tation of today's "recycling culture." Building materials can be preserved, environmental disturbances can be minimized and energy usage and emissions are reduced by not demol- ishing the original structure. Investing in sustainability upgrades is not only an important code compliance issue, but also an effective way to improve ROI. A building's operational effcien- cy can be easily improved through energy benchmarking and retroft- ting measures. Simple solutions that provide quick returns include ener- gy-effcient LED lighting, automated building controls, and low-fow fx- tures as well as window glazing or air tightening measures to greatly reduce the heating and cooling demands. In addition to lowering operating costs and increasing marketability, reduced energy usage may qualify the asset for energy effciency certifcations or en- ergy improvement rebate programs. Signifcant opportunity lies in the trend of adaptive reuse to improve the highest and best use of older buildings in the land-scarce Northeast region. If done right, adaptive reuse projects present developers with lucrative op- portunities in this highly competitive and regulated market, and play an im- portant role in revitalizing communi- ties and furthering sustainable devel- opment in the region. John C. (Chris) Morris III, P.E., is national practice leader with Partner Engineering and Science Inc., out of the company's Eatontown, New Jersey, offce. FROM SUPERMARKET TO MEDICAL CENTER Not all adaptive reuse projects require historic charm. Some just capitalize on solid space in a good location. For example a medical center in Camden County, New Jersey, converted a vacant 40,000-square-foot former super- market, located across the street from the hospital, to a regional kidney dial- ysis center. The project saw a complete renovation of the building to include 15 kidney dialysis beds, offces, waiting areas, deionized water facilities, examination rooms, support and lab areas and storage. Partner Engineering and Science Inc. served as a building systems consultant to address HVAC, plumbing, fre protection, electrical systems and construction phase servic- es. As one can imagine, the electrical, plumbing, HVAC, and IT systems for a supermarket are vastly different than those for a medical center. The new building required higher functioning HVAC and IT systems, new medical gas systems, and specialized plumbing for deionized water. Emergency power systems are of great importance in a medical facility so that system required updating and increased capacity. Despite extensive upgrades that were required, the adaptive reuse of the existing structure was calculated to be more economically and practically viable than to rebuild a new medical center, due in part to the vicinity of the existing building (directly across from the hospital) and adequate additional (existing) parking. COMPLETED PROJECTS: FEATURED PROJECTS: Crossroads Howell Commons Eatontown, NJ Howell, NJ Ethan Allen Linden Commons TJ Maxx Marlboro, NJ Linden, NJ Woodbridge, NJ AutoZone Staten Island, NY, Garwood, NJ, Little Ferry, NJ ShopRite Staten Island, NY Xscape Theatre Howell, NJ The market demand for "character" means well-executed adaptive reuse projects can achieve premium rents and sales prices, as well as improved tenant attraction and retention.

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