What To Know About Adaptive Reuse in Commercial Real Estate

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Are you a commercial real estate investor looking for innovative ways to maximize your property’s potential? One strategy gaining popularity is adaptive reuse, where a property is repurposed for a different use while retaining any historic structures or features of the original building. 

For instance, an investor could transform an old church into a trendy restaurant, convert a school into a museum, or renovate a dilapidated factory into multifamily housing. Learn why adaptive reuse might be the key to unlocking your property’s maximum value.

Examples of Adaptive Reuse in Commercial Real Estate

Since the pandemic, multifamily construction projects have grown to meet the work-from-home demand. This trend has piqued interest in transforming office buildings into multifamily housing to keep up with consumers’ requests. Repurposing is also occurring in retail and office buildings. Here’s a closer look at adaptive reuse in each asset class.

View of DUMBO, including the Brooklyn Bridge, Empire Fulton Ferry Park, Jane's Carousel, and Empire Stores

Adaptive Reuse in Multifamily Properties

South Side on Lamar is a registered landmark that was once known in the Dallas commercial real estate market as the Sears Building. In 2000, developers converted it into a multifamily tower that spans 798,163 square feet, with ten floors, first-floor retail space, and 252 parking spaces. This multifamily development also shares a neighborhood with various restaurants and hotels, a movie theater, other residential properties, and Jack Evans Police Headquarters.

Adaptive Reuse in Retail Buildings

One example of adaptive reuse in retail buildings is architectural firm KTGY’s project Re-Habit. KTGY saw an increase in homelessness and retail stores closing and decided to combat both issues by providing a safe environment to live and sleep in. Re-Habit repurposes a vacant big-box store into a co-living area with retail spaces, resources for long-term self-sufficiency such as job training, sleeping pods, and dining halls.

Adaptive Reuse in Office Buildings

Older office buildings with multiple vacancies may need help attracting tenants if they lack nearby mass transportation or if the building requires a large amount of money for renovations. The modern-day workplace has changed from the cubicle setup to a more spacious layout, making warehouses and old factories great contenders for adaptive reuse.

Behr Paint Company recently did this in Santa Ana, CA, when they converted a 30-year-old commercial building into their headquarters. By the time the project was finished in 2018, 230,000 SF of existing space was renovated, combining five separate units to create their headquarters. This project also incorporated sustainability by reducing negative impacts and encouraging ideas that produced a positive environmental impact.

Conference zone in the office in a loft style with brick walls. Zone has a wooden table with black chairs and glass walls
Conference zone in the office in a loft style with brick walls. Zone has a wooden table with black chairs and glass walls

Key Factors to Consider

CRE investors planning to utilize adaptive reuse have a few factors to consider before purchasing a property. Researching these issues will prepare you to make the best-educated decision when choosing a CRE property for adaptive reuse.

Site Selection and Due Diligence

Like any other real estate endeavor, finding a prime location is an essential factor when selecting a property to repurpose. The success of your investment largely depends on where you decide to buy, so look for high-traffic areas with similar uses to yours. Once you find a location, you must perform due diligence, including assessing the design, engineering, land use, construction, finances, and more.


Zoning regulations and code compliance can be a deterrent when taking on an adaptive reuse project, so it is best to do your research and due diligence first. Since few investors take on reuse projects, the city you purchase your building in may not be familiar with creating new zone regulations. Cities that do have regulations in place will still require months of paperwork before the zoning change. This issue should resolve on its own down the line as adaptive reuse projects become more common.

Code Compliance

Code compliance for adaptive use buildings differs greatly from code compliance for a regular commercial building. There are limited resources and incentives from the government and limited flexibility when it comes to building codes. 

Becoming familiar with the building codes as well as regulations for fire safety is crucial, as it can be challenging to work around these situations with an old building. For example, if you purchase an old factory, you may need to update the windows or doors to be ADA-compliant, which can result in a lot of money and time, depending on the issue.

Pedestrian-friendly walkway in city center during night time

Advantages and Challenges of CRE Adaptive Reuse

There are plenty of advantages that pair with reusing commercial real estate properties. One perk is that most CRE buildings are in high-traffic areas with access to public transportation. Adaptive reuse is also economically sustainable, as utilizing a pre-existing structure minimizes waste and materials while simultaneously cutting down on emissions.

In densely populated areas, converting from a commercial to a residential property can decrease traffic and parking requirements. New, converted multifamily spaces can motivate others to convert more buildings into mixed-use properties, creating a stronger, more walkable community. Repurposing a building also preserves any cultural history the property may have, which brings interest and diversity to the community.

Challenges include getting the building up to code during the design and construction process. You may need to invest more money first to bring the property up to modern standards to meet energy and accessibility requirements. Code requirements can also get complex when dealing with federal historic tax incentives, which may require keeping specific structures, even if they don’t measure up to code.

Another consideration is that since you aren’t working with a new building, you must work around the existing building’s conditions. With an older building, you may also run into hazardous materials such as asbestos and lead paint, which will need to be inspected and removed. This can add both cost and time to your construction timeline.

Generative AI illustration of Architectural plans, drawings, pencil sketches, paper textures, book pages, floor plans. Architecture concept

The Bottom Line

As we continue to develop economically sustainable and resourceful construction methods in the commercial real estate industry, opportunities will open for more adaptive reuse projects. The most popular option for pre-existing office space is converting it into a multifamily residential. As the demand for apartments grows, so will the incentives to convert empty office space into residential units. 

Reusing old structures for new purposes is a sustainable method as it repurposes the construction and materials that are already in place. This real estate investment strategy is becoming more popular as it preserves architectural history while lessening the effects on the environment rather than purchasing a new development.

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Shanti Ryle
Shanti Ryle

Content Marketing Manager

Shanti leads Crexi's content marketing strategies with 7+ years of content development experience, creating everything from blog posts to award-winning podcasts. Previously, she worked on content teams at Snapchat, Weedmaps, and HopSkipDrive as well as developed copy, articles, and media for freelance publications.

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