The diminishing volume of quality multifamily development sites will influence more developers — especially local firms — to target conversion opportunities that involve transforming aging factories, schools, office buildings, warehouses and churches into rental product.
A number of these aging buildings are infill-located or in submarkets that have undergone recent gentrification. By saving the core or shell of a building, incorporating existing interior features and obtaining various available tax credits, developers can save money on project costs.
Additionally, the time frame for a conversion project is typically shorter — 12 to 15 months — than building a new project from the ground up.
The highest volume of apartment conversion projects will occur in the Mid-Atlantic and Great Lakes areas.
Philadelphia stands apart as one market with a significant pipeline of conversion deals. A century-old church and school was recently approved for a 34-unit apartment conversion. Developer MRP Realty is reportedly looking throughout Philly for old office buildings that can be converted to apartments. A $35 million conversion of a seminary is slated for upcoming completion.
In nearby Pittsburgh, Philly-based developer Core Realty plans to transform seven to 13 floors of a Macy’s building into 311 units. D.C. represents another Mid-Atlantic market primed for conversions involving office buildings and hospitals.
Down the coast, North Carolina will see its share of upcoming conversions. East West Partners recently broke ground on a project that will transform a warehouse in downtown Durham into 247 units. A furniture warehouse in Greensboro will also be converted to rental.
Primary cities within the Great Lakes region will allow for conversion opportunities. In Chicago, Stonestreet Partners will redevelop a former funeral home, while a long-vacant office building in downtown Milwaukee will be repurposed into 200 units. Cleveland represents another city in the region with conversion possibilities.
The Midwest also presents developers with conversion chances. In Memphis and Chattanooga, Tennessee, hotel and office-to-apartment conversions are ongoing or approved. In Kansas City, a Folgers coffee plant will become 146 units by this summer. At least three other approvals are in process for three downtown conversions in the city.