Adaptive reuse and transit-oriented development are two prominent trends shaping the Northeast investment real estate market. As vacant office properties, abandoned mills and defunct retail assets are adapted for new uses such as multifamily housing, investors have opportunities to acquire Class-B and Class-C assets below market value and create the conditions to establish and maintain in-demand housing units.
Adaptive reuse in Westchester County, New York
Adaptive reuse is playing an integral role in filling vacant space and driving development in the Westchester submarket. Formerly vacant office buildings, in particular along I-287, are being transformed into mixed use developments. Evidence of the adaptive reuse trend, GlobeSt.com recently reported that a portion of the recently acquired Westchester Financial Center, an office complex boasting three buildings and more than half-a-million square feet of office space, will become luxury rental apartments. And, a recent local market report notes this trend has resulted in a 6.8 percent year over year decrease in vacant office space.
Transit-oriented development is booming in Fairfield and Hartford County
The Hartford rail line is projected to be a catalyst for transit-oriented development and many new projects are already underway. Two vacant downtown office buildings on Pearl Street are slated to become market-rate rental apartments. Hartford Business Journal reports this and other projects in the Greater Hartford area are part of “construction wave” which is projected to add 500 new “lifestyle” apartment units to the region during the next 18-months. Many of these new developments are located in close proximity to mass transit and/or in walkable areas, which offers conditions to help landlords drive high occupancy rates.
In Fairfield, the Town Planning and Zoning Commission recently approved development of a five-story mixed use project which will house 160 apartments in addition to ground floor retail at the intersection of Kings Highway and Ash Creek Boulevard. Approval of a second development near the train station brings the total number of new apartment units anticipated to 200, along with 22,000 square feet of retail space. In nearby Trumbull, municipal leadership is looking to breathe life into what were formerly dubbed “commercial dead zones” and also aspires to revamp the Long Hill Green area.
For investors, an influx of new Class-A apartment units often provides an opportunity to raise asking rents on existing Class-B and Class-C assets. A high volume of vacant and/or outdated apartment units, as seen in the Greater Hartford region, also offers investors opportunities to purchase assets below market value and make capital improvements, thus creating the conditions for optimal asking rents and strong occupancy rates.
Vacant mills find new life in Western Mass.
The MGM Springfield resort casino will drive demand for workforce level multifamily housing in Western Mass. and along the I-91 corridor. In addition, MassLive.com reports that a proposal for the group to redevelop a block of property in Springfield to create new market-rate housing remains on the table.
In Worcester, vacant mills are finding life as multifamily housing. Two examples of this adaptive reuse trend are the former Van Brodie Mill in Lawrence, which will become a 102 mixed-incoming housing community, and the Cornell Mill Lofts in Fall River. Also following the adaptive reuse trend, a former campus building for the Andover Newtown Theological School will soon become a memory care facility.
Supply and demand remain challenges for the Rhode Island market
Since 2015, the Rebuild Rhode Island program has served as an economic development catalyst supporting 28 building projects which boast 3.3. million square feet of real estate. Additionally, construction of Amgen’s new biomanufacturing plant in West Greenwich is expected to create 150 manufacturing jobs and 200 construction jobs. In a market historically characterized by low inventory and high demand for residential properties, including multifamily units, this growth only stands to continue the trend of demand outpacing supply. For investors, there remains an opportunity to purchase assets and create multifamily housing with high occupancy rates, however inventory is limited. For more information on the Rhode Island investment real estate market, click here.
As adaptive reuse and transit-oriented development continue to shape the multifamily real estate market, investors can benefit from identifying under-valued properties located in close proximity to mass transit to add to their portfolio. These properties offer upside for investors and will remain desirable among prospective tenants who have been priced out of the Class-A market and/or major metropolitan markets such as Boston and New York City.