Hey, What’s That Missoula? Episode 1
Adaptive Reuse in Downtown
Take a walk through Downtown Missoula and you may notice a number of buildings undergoing the transition from nondescript, dated space to beautifully restored and repurposed designs. While Adaptive Reuse (AdRu) has always held the promise to save iconic real estate assets across the United States, younger generations – especially the millennial demographic – has long been thought to be the primary driver of the adaptive reuse model. With the cost of new construction and land acquisition costs rising to levels which prove challenging for a developer to turn a profit, investors are now beginning to see AdRu as a strategy to boost NOI and yield. According to an article published by the CCIM Institute, many experts speculate that adaptive reuse projects will make up a greater percentage of investment activity than select non-core asset types, such as self-storage, by 2023.
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The Mercantile Hotel is one of the most prominent recent examples of AdRu in Missoula. Other notable examples include the Radio Central Building on Main Street – which has been used as retail, office, and residential over the years. The building had not seen significant capital improvements in decades and was facing challenges associated with functional obsolescence. The new investment ownership group has repurposed the previously empty second and third floors to fully functional, modern office space with hints of the building’s historic past left throughout the renovation. Another interesting AdRu project is the previously unused basement space in the Hammond Arcade Building. The new ownership group has opened up this space to tenants looking for affordable downtown space with a unique, urban feel.
Other transformations downtown include the revitalization of mixed-use buildings with ground floor retail and upper level residences. The hospitality boom is an exciting example of Adaptive Reuse and should prove to be a heavy influence on the overall look and feel of Downtown Missoula.
Careful market analysis is vitally important in identifying profitable adaptive reuse projects. A thorough understanding of user demand in the immediate area, feasibility studies to determine the target market for the project and in-depth knowledge of local approval and permitting processes are just some of the items to consider when looking into an AdRu concept. Sterling CRE Advisors has been involved with a number of reuse projects in Missoula and can offer valuable development insight for investors and owners.