Unrecognized assets: Low-density commercial buildings
According to Reshaping Metropolitan America, about half of all nonresidential structures in the US will be “ripe for redevelopment” in 2030. Many of these are commercial strip retail buildings with large parking lots or dated office buildings on suburban sites. The annual report Emerging Trends in Real Estate notes that many suburban retail and office properties across the US are languishing in value and may not be worth refurbishing.
All in all, 50 billion square feet of commercial space in the US will need redeveloping by 2030, says author and researcher Arthur C. Nelson. One of the challenges to redeveloping such sites, however, is that they are often located on commercial strip corridors that are not appealing for mixed-use development. That challenge could be addressed by “complete streets” projects on major thoroughfares that need to be rebuilt anyway, setting the stage for redevelopment.
So, public investment is required. Nevertheless, Nelson makes a strong case for why these sites are likely to be reused.
Vacant shopping center
“Although parking lots and deteriorating low-rise structures may sound more like liabilities than assets, I believe they provide America with an unprecedented opportunity to meet emerging market needs by simply reshaping what is built,” he says. Here are seven reasons, as reported in Nelson’s 2013 book Reshaping Metropolitan America:
• “They are flat and reasonably well-drained,” and often have stormwater retention infrastructure in place, “so this part of the development process is already finished.”
• “Almost all of the sites sit along major highways” and are transit-ready.
• Large-scale utilities are already in place. Upgrading these utilities is a lot cheaper than building them from scratch.
• They’ve already been zoned for something other than low-density residential development, which makes NIMBY opposition to mixed-use projects a lot less likely.
• The sites are generally owned by a single entity that is motivated to maximize their return, removing impediments to redevelopment from multiple ownership of small sites.
• As these sites age, their deteriorating condition “compromises the value of nearby residential properties.”
• Nearby residents may be motivated to deflect development pressures away from their neighborhoods to these properties.