Adaptive Use Is Reinventing Detroit

Posted by on Sep 23, 2015 in Brian Fielding, Commercial Property Investment, Fielding investments, Property Investment Advisor | Comments Off on Adaptive Use Is Reinventing Detroit

Adaptive Use Is Reinventing Detroit

Adaptive Use Is Reinventing Detroit

Of course, Detroit’s redevelopment momentum has had challenges. The city’s bankruptcy filing in 2013 unleashed a new wave of negative publicity, although some people saw it as a positive development, evidence of a government finally tackling its troubles. Also, Detroit had been depressed and losing population for so long that many banks would not consider financing any speculative real estate endeavor in the city. As a result, most adaptive use projects have had to cobble together a patchwork of financing, including city incentives and loans, federal loan guarantees, various government tax credits, private angel investors, plus collateral such as pledges against existing businesses or homes.

“We couldn’t attract traditional forms of capital without finding myriad other subsidies to make the projects pencil out,” says Malik Goodwin, a former Detroit Economic Growth Corporation vice president and now a real estate development consultant. “We had to be highly innovative.”

In terms of land mass, Detroit is a small city; of the 24 U.S. municipalities with at least 600,000 residents, Detroit is the fourth smallest, at 139 square miles (360 sq km). And the city’s hottest corridors for redevelopment cover a sliver of that small land mass, just 7.2 square miles (19 sq km). This encompasses the traditional downtown along with adjoining neighborhood districts such as Midtown, Corktown, and Woodbridge. “The 7.2,” as it is called, houses the major institutions and attractions in the city, from sports stadiums to Wayne State University, from clusters of art galleries to collections of architecturally significant buildings, and that is where market rates have the best potential to support investment.

Within this “greater downtown” area, 3,012 new or renovated housing units were developed from 2010 to 2014, an increase of roughly 16 percent, according to a 2015 downtown trends report prepared by the Hudson-Webber Foundation, an institution dedicated to improving the vitality and quality of life in Detroit. Similarly, the report noted a 13 percent jump in retail establishments in that area from 2013 to early 2015.

Significant new projects, especially adaptive uses, seem to be unveiled every few weeks. In a span of several weeks earlier this year, for example, Detroit officials announced a deal with developers to convert the graffiti-covered Brewster-Wheeler Recreation Center, where boxing great Joe Louis once trained, into a restaurant and new community center, and a team of developers including basketball great Earvin “Magic” Johnson announced a mixed-use redevelopment that incorporates some of the historic buildings at the old Michigan State Fairgrounds.

Such adaptive use projects offer a multitude of benefits. According to a forthcoming review of adaptive use literature prepared by Wayne State University urban planning professors and funded by U-Haul, projects tend to mitigate blight, increase surrounding property values, and reduce greenhouse gases associated with demolition and new construction. Moreover, the report pointed out that “there is a modest but growing body of evidence that ROI [return on investment] from adaptive use is generally higher than ROI for new construction” because of higher occupancy rates and rents, plus the underestimated value of goodwill.

Certainly, Detroit’s recent experience appears to demonstrate this, too. Three projects in particular offer some lessons in how to make adaptive use work.

Original article: http://urbanland.uli.org/economy-markets-trends/adaptive-use-reinventing-detroit/ 

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