|As the footprint of urban centers continues to grow, demographic shifts have changed how municipalities view certain areas. Strong industrial centers get pushed to the outskirts to strengthen residential and commercial sectors.
Since converting an existing property to an alternate use is costly and carries risk, investors need to determine the highest and best use for their properties.
Before you consider a conversion project, review the following five factors.
1. Consider Municipal Zoning
Zoning regulations in your municipality can change over time. These changes are usually driven by demographic shifts within the community. It is common practice to push industrial space to the outlying regions in order to allow a mix of commercial, park, and residential spaces closer to the community’s core.
As growth occurs, communities adapt their municipal plans and layouts in order to encourage continued growth. Municipal plans can provide valuable clues as to what type of conversion would meet with the planner’s approval.
2. Determine Best Use
It can be challenging to determine the use that will result in the greatest reward for the investor. A detailed analysis that considers cost and return is important before making a significant financial commitment to any project. Conversion projects utilize an existing structure, but that doesn’t always result in significant cost savings when compared to building a new structure. As you go through your vetting process, keep asking yourself: Is the total value of the location, structure, and complementary buildings equal to or greater than the cost of the completed project?
3. Determine Cost of Conversion
Converting an existing building to an alternate use may have hidden costs. This often depends on the age of the building and what the previous uses of the property were. A detailed environmental report should give investors piece of mind that the environmental costs will not eat up all the project’s potential profits. Rezoning from the current use to a new use will have costs and hurdles to overcome as well. Every property conversion project will require a unique road map to see the project through to completion.
4. Examine Whether the Project Meets Your Investment Needs
Each investor brings a unique knowledge and expertise to their investments, so this will deeply influence the type of investments they seek. A conversion project requires extensive expertise in zoning laws, building practices, and demographic analysis. It will be necessary to examine whether you possess the skills to see the project through from start to finish or whether you will need to invest in outside help.
5. Seek Professional Advice
Professional insight is invaluable in a complex project such as a building conversion. Legal advice will help navigate the perilous world of municipal zoning and permits. Speaking with a real estate agent will give insight into demographic changes in the community, and the agent will assist with property searches. Structural engineers may be necessary to examine how proposed alterations to the building’s structure and amenities will impact the building. Environmental inspectors may unearth hidden problems before the project is underway.