Sustainable Urban Redevelopment

The inherent ­sustainablity in the adaptive reuse of industrial sites.

Although you would never know it from reading the press releases from the Environmental Protection Agency (EPA), there is far more to sustainable development than so-called green buildings. As the Washington-based architect Carl Elefante likes to say, “The greenest building is the one that isn’t torn down and dumped at the landfill.”

The adaptive reuse of warehouses, mills and other industrial buildings is the essence of what real sustainable development is all about. We are learning every day that the preservation of the historic built environment is the oneindispensable tool in a comprehensive sustainable development strategy.

In the United States, adaptive reuse is central to our version of “historic preservation” but that isn’t always true internationally. ­­A couple of years ago the International Conference of National Trusts held their biennial meeting in Washington. One of the speakers was from the National Trust of England, Wales, and Northern Ireland.

In the final plenary address, he expressed considerable skepticism about a broad policy advocacy for adaptive reuse of warehouses and other industrial buildings.

He started by saying that in this post-industrial world we are facing the “inevitable redundancy” of industrial buildings. He expressed concern that if preservationists put industrial buildings on the high priority list, “we risk being the scrap yard of the future.” He claimed that we “….need to be more vigorous in choosing what we need to preserve” or else we “…risk clogging up creativity.”

He warned of the “…ongoing struggle between adaptive reuse and authenticity” and that by advocating the adaptive reuse of these industrial buildings, we are in essence destroying the “spirit” of the place. He went so far as to ask that if industrial buildings only survive through adaptive reuse, what meaning is really left.

I disagree with him on almost every point, so let’s take a look at those arguments.

First, he said that we are facing the “inevitable redundancy” of industrial buildings. We do have plenty of buildings in this country for which the use no longer exists. That applies to textile mills where the manufacture of the product has moved overseas. It applies to storage facilities, which were originally built vertically to accommodate the needs of the era, but which are now built horizontally. And it applies to manufacturing facilities where in the 19th century the raw materials were lifted to a fourth or fifth floor, processed by moving down, floor by floor through the building, and finally taken out at the ground level to be sold or shipped away.

But, beginning with the conveyor belts of the 1920s and then fully in place by the end of the 20th century, manufacturing processes, following the assembly line sequence, required one story, not four story buildings. So the uses for which those buildings were built no longer exist, or don’t exist in that
configuration.

In real estate terminology, that represents a combination of functional obsolescence – deficiency because of the design of the building, and economic obsolescence – lost value because of factors beyond the property itself.
One response to both functional and economic obsolescence is demolition. The other response is adaptive reuse.

The Alternatives
So we have a functionally and economically obsolete building in our community, what are our options? I think there are six of them:

• We could do nothing.
• We could tear the building down.
• We could artificially reinsert the old use back into the building.
• We could make the building a museum.
• We could manage the building as a ruin, allowing ongoing deterioration.
• We could adaptively reuse the building.

What would be the consequences of each of those alternatives?

If we do nothing. The building will continue to be a physical and psychological eyesore, an ongoing environmental problem area, generating few if any local tax revenues, creating no jobs, and have an adverse impact on nearby properties.
If we tear the building down. This will remove a piece of the community’s evolution, creating an environmental waste in landfill and embodied energy (I come back to those later), and generate fewer taxes and no jobs. In theory a new building could be built. But if there is demand for a new building, rarely on industrial sites or warehouse districts is there a shortage of land on which a new building could be built.

If we artificially insert the old use back into the building. There would never be the political or financial support to do so. We could insist on continuing to make buggy whips in the buggy whip factory, but that is akin to paying people to dig holes and then to fill them back up again.

If we turn the building into a museum. Some visitation might be created, but there is a very finite demand for specialized museums, and they are very expensive both to create and to maintain. A museum might be appropriate for one or two industrial buildings, but not one or two thousand.

If we turn the building into a ruin. What have we accomplished? Is the “spirit of place” maintained in a rotting building? I’m happy that we have Roman, Greek and Egyptian ruins to explore. But I’m hard pressed to see this as an appropriate end to an industrial building. (By the way, the English National Trust representative did mention that they have some ruins in their property collection, but he acknowledged that it takes millions of pounds a year to maintain them.)

So that leaves adaptive reuse. If we do, who benefits from it? We could start with the city. Adaptive reuse of industrial buildings can mean: population growth, the more intensive use of existing infrastructure, sales and property tax revenues, the elimination of a physical eyesore and psychological eyesore, the elimination of a potential environmental hazard, and an ongoing sense of evolution of the city.
Adaptive reuse benefits the local economy through the creation of construction jobs, permanent jobs, increased household income, opportunity for job training, sales tax on labor and materials during construction and long term revenues from the users and uses in the building when completed.

From a public policy standpoint adaptive reuse means Smart Growth. We aren’t extending water lines, sewer lines, roads and police protection into the country – we are building within the fabric and context of the existing community.

Adaptive reuse means using historic preservation not to freeze the past but to move into the future. Invariably it reflects the principles of urban quality in scale, materials, design, human orientation, siting, and respect for context.

Probably the most underappreciated characteristic of historic buildings is their extraordinary adaptability. I would be hard pressed to identify a single type of use of any kind that isn’t found in an historic building somewhere in America. And of all of the types of buildings as a category, warehouse buildings represent the most cost effective rehabilitation for adaptive reuse.

The adaptive reuse of warehouse buildings also has a positive impact on the preservation movement itself. In spite of preservationists’ best efforts, much of the public still thinks of historic preservation as only for mansions and museums, and keeping things static. The adaptive reuse of industrial buildings represents historic preservation as using utilitarian buildings, of generating income and as active, not passive places.

Of our six alternatives with industrial buildings, none makes more sense than adaptive reuse.
Rebirth and the Entrepreneur

For the most part, we aren’t talking about saving industrial buildings as permanent assets of some preservation organization. The success of adaptive reuse of industrial buildings in America has been in the encouragement of the private sector to invest their capital in exchange for a financial return.

As to the argument by our friend from the National Trust of England, that by preserving industrial buildings we are “clogging up creativity,” take a look at the success stories of industrial building reuse throughout America. They represent a cornucopia of creativity in their design, use, and financing, and in the skills of those involved. In truth, the adaptive reuse of a warehouse building is a great demonstration of creativity.

Which brings us to the last of the arguments: that through adaptive reuse we destroy the authenticity, the meaning, and the “spirit of the place.”

If we were to preserve the “spirit of the place” of an industrial building, what would that mean? Strictly speaking, it would mean maintaining an environment that was smelly, dirty, noisy, unsafe, and unhealthy.

Before I leave this “spirit of the place” issue I want to do a small experiment. Think of your favorite historic place anywhere in the world where you have visited. Do you think the “spirit of the place” still exists there?

Does it have indoor plumbing? I’ll bet it didn’t when it was built. Does it have slaves or indentured servants? In many cases it did when it was built. Does it have electricity? It didn’t when it was built. Do half the children die before they reach the age of 5? In many places that was the statistic when it was built.

So have we lost the “spirit of the place” because those things are no longer true? Perhaps, but I would argue that “spirit of the place” is a dynamic not a static concept.

The goal of historic preservation is not to freeze buildings in time, but rather to allow the ongoing evolution of the community and the “spirit of the place” as an ongoing process. Converting warehouses into shops or offices or residences is simply another step in that process.

The Psychological Hit
There was a small town in Illinois that had a factory and every day at noon its whistle would blow. It came to pass that the factory closed, but the whistle kept blowing every day at noon. People were used to it so nobody bothered to disconnect it.

What was really happening was that every day the citizens of that town were reminded of a loss, of a failure. It wasn’t a loss that they could have done anything about. The circumstances that lead to the factory’s closing wasn’t the fault of anyone in the town, but subconsciously that whistle said every day, “You’re less than what you were.”

That is the effect – often unacknowledged – that the empty industrial building has on its community. It may not be on the conscious level – we may have seen that building every day of our lives – but instead of being a center of activity that industrial building has become a sign of failure. That, more than anything, is often the real, if unspoken reason many people will just want it torn down.

But the magic of adaptive reuse is that same building can become not a symbol of failure but a symbol of success, of perseverance, of pride, and of community renewal. A new “spirit of the place” emerges and reenergizes and has an impact far beyond the property boundaries.

Broader Meaning of Sustainable Development
There is a central concept that many environmentalists in the United States haven’t fully grasped yet, and that is the role that historic preservation in general and adaptive reuse in particular play in sustainable development.
We have too narrowly defined sustainable development in this country, and other places in the world are thinking ahead of us.

King Sturge, an international real estate consulting firm headquartered in England, has been at the forefront of broadening the concept of sustainable development. Their framework not only includes environmental responsibility but also economic and social responsibility.

They further identify these important nexus: for a community to be viable there needs to be a link between environmental responsibility and economic responsibility; for a community to be livable there needs to be a link between environmental responsibility and social responsibility; and for a community to be equitable there needs to be a link between economic responsibility and social responsibility.

When we think about sustainable development in this broader context the entire equation changes and includes more than simply, “Is this building Leadership in Energy and Environmental Design (LEED) certified?” or “Is the snail darter habitat being protected?”

Embodied Energy
When we think about sustainable development in this broader context, the role of historic preservation becomes all the more clear.

Here’s just one concept that applies directly to the adaptive reuse of warehouses and represents environmental responsibility. It’s the concept of embodied energy, which is the total expenditure of energy involved in the creation of the building and its constituent materials. When we throw away an existing warehouse, we simultaneously throw away the embodied energy incorporated into that building.

How significant is embodied energy? In Australia they’ve calculated that embodied energy in their existing building stock as equivalent to ten years of the total energy consumption of the entire country.
Razing historic buildings takes a triple hit on scarce resources.

• First, we are throwing away thousands of dollars of embodied energy.
• Second, we are replacing it with materials vastly more consumptive of energy. What are most historic warehouses built from? Brick, plaster, concrete and timber — among the least energy consumptive of materials. What are major components of new buildings? Plastic, steel, vinyl and aluminum – among the most energy consumptive of materials.
• Third, recurring embodied energy savings increase dramatically as a building life stretches over 50 years. You’re a fool or a fraud if you claim to be an environmentalist and yet you throw away historic warehouses, and their components.

What about historic preservation and economic responsibility? This is an area of research that continues to grow – jobs, household income, labor intensity, heritage tourism, downtown revitalization, property values, small business incubation, economic competitiveness, the movie industry, participation in economic globalization while mitigating cultural globalization.

But most importantly, perhaps, is social and cultural responsibility. Here is where preservation’s most important contributions are being recognized: workforce housing, economically integrated neighborhoods, neighborhood stabilization, quality of life, urban character, sense of evolution, economic development that is simultaneously community development, and historic buildings that are the physical manifestation of a city’s memory.

The whole purpose of sustainable development is to keep that which is important, valuable, and significant.
The definition of sustainable development is “…the ability to meet our own needs without prejudicing the ability of future generations to meet their own needs.” We need to use our cities and our historic resources in such a way that they are available to meet the needs of future generations as well. Sustainability means stewardship. Historic preservation is sustainable development. Historic preservation makes cities viable, livable, and equitable.

Common Denominators of Successful Adaptive Reuse
But the lessons that have been learned in recent years about industrial building adaptive reuse are not confined to the theoretical. There has now been sufficient experience where some common denominators of success can be identified, particularly for the adaptive reuse of the so-called, “white elephant” building.

You will notice that I have shifted vocabulary from “historic warehouse building” to “white elephant.” While frequently historic warehouse buildings are seen as white elephants, not every white elephant building is an industrial building. But I’ve tried to limit the items on the list below to those that particularly apply to warehouse buildings.

First the property itself is identified as a community asset, regardless of who the present deed holder happens to be. The community really feels, “this is our building.”

Second, there is a core group who takes action. That is the three or four people at the Kozy Korner Kafe who decide, “We need to do something.”

Third, there is an imaginative catalyst. This catalyst might come from anywhere – from a local Main Street program or a mayor or a banker, a city planner or a retailer. Where the imaginative catalyst comes from varies a lot, but the existence of an imaginative catalyst does not. Furthermore, the imaginative catalyst is rarely the current building owner.

Next there is broad based support for the project in the community. Now this doesn’t necessarily mean thousands of people. But it does mean that the successful efforts cannot only be supported by preservationists or by staff at city hall.Rather there is horizontal support by various types of organizations and individuals across the community.

Public sector participation is probably the invariable component of these projects. If there isn’t support at city hall in some measurable fashion, it just isn’t going to happen.

And there are always multiple sources of financing. In traditional development, there are usually two sources of funds – equity from the developer and a first mortgage from a lender. In the adaptive reuse of industrial buildings it is not uncommon to have two, three, four, or five sources of debt alone.

Next, these projects are always complex – even the smallest of them. One of the reasons that they always take time is dealing with this complexity. If they were simple, the private sector wouldn’t need help to put the pieces ­together.

Time is the next common denominator. These projects are always very time consuming. And however long you think they are going to take, they take longer than that.

Most of the time the redevelopment of a warehouse building requires a mix of uses. Rarely are they redeveloped as only housing or only offices or only retail.

The successful projects are demand driven. It is necessary to turn the equation around. You don’t start with the building and ask “What can I do with it?” You start with trying to identify the unmet or under-met demand in the marketplace. Then you ask, “Could we meet that demand in the warehouse district, and if so could we meet that demand in this building?” Then you have a chain of reasoning that can lead you to a successful redevelopment plan. But if you start with, “I’ve got 60,000 square feet of empty space, how do I fill it?” you only end up with stupid ideas.

There will be significant public skepticism during any redevelopment process. Most people simply won’t believe the project is really going to happen until they see guys with hardhats and 2 x 4s on their shoulders going into the building.
They won’t believe it until they hear the sound of the hammers on nails. And this is independent of the credibility of the individuals you have working on the project. You might have put together a team that includes the mayor, the bank president, the head of the chamber of commerce and the richest lady in town – it doesn’t matter. Most people will doubt that the project will actually come to fruition. That is, of course, until the project is completed, at which time everyone will both claim credit and say, “I always knew this was going to happen.”

Successful projects early on identify target markets who are going to be the ultimate users of the building. And the more specific the target market is the greater chance of­ ­success.

There needs to be flexibility in use, financing, timing and transaction.

The three most important ingredients in these projects are in order: time, flexibility, money. Time is way more important than money. But after time comes flexibility. The three big mistakes that preservationists often make are: “We have to do it all, we have to do it now, and we have to do it on this preconceived use.” That lack of flexibility almost always assures failure.

Property owners are never happy to hear this, but it is very, very common that the purchase price of the white elephant building approaches zero. But sometimes acquiring a property for nothing can be a very expensive price. Not every successfully redeveloped, industrial building was acquired for nothing, but many of them were.
The next two criteria that successful projects require are characteristics that aren’t typically strong points of either developers or preservationists: compromise and patience. But both are required in almost limitless degrees for these types of projects.

Finally, the easiest of these projects are hellishly difficult. And when they are seen as an end in themselves, they reach the point of being nearly impossible. The successful projects are not an end in themselves but rather seen as one more step in a larger picture; one project that is advancing broader ends. That’s why a white elephant project is much more likely to succeed in a Main Street community or as part of a comprehensive warehouse district effort. It is an incremental step in a comprehensive strategy, not the single big fix.

The Expensive Mistakes
By definition, adaptive reuse means rehabilitation, not new construction. And rehabilitation can be expensive. But there are predictable mistakes that make rehabilitation projects more expensive than they should be.

Paying too much for an acquisition has a long term effect. There’s an old saying in real estate that you only have one chance to make money and that’s when you buy it; after that, someone else is always in control. If you pay too much acquiring the property in the first place, you’ve likely precluded yourself from making money later.

Spending too much on rehabilitation is another big mistake. Everyone wants to “do it right,” but there’s a difference between doing it adequately and making every expenditure every architect, preservationist, and cost-plus contractor wants to make. It is essential not to over spend on rehabilitation.

Related to that is not controlling costs. Rehabilitation requires unusual levels of daily management and if costs aren’t controlled during the process, you’ll find a much larger bill than you were prepared for.

Inadequate physical analysis of a project is still another big mistake to make. You don’t want to wait until the project is underway to find out that your crumbling foundation is being held together with asbestos, which is covered with lead paint. One of the important uses of seed money is to conduct the physical analysis early, preferably long before you acquire the title to the property.

Not allowing enough time. Time is the killer. If you have enough time, sooner or later you can come up with the money. But if you run out of time, you’ve run out of opportunities.

It is an expensive mistake to diminish the architectural integrity of the building. This isn’t some goofy preservationist argument. If we are honest, we’ll acknowledge that there are competitive advantages to new buildings over the most well done rehabilitation of older buildings.

Floor plans, net to gross ratios, parking accessibility, mechanical systems, loading docks, all may be better in well-designed new buildings. That being the case, we cannot afford to give up one of the few competitive advantages that rehabilitated older buildings have and the chief point among them will be the architectural character of the building itself. That is a major selling point and it is an expensive mistake to diminish the architectural integrity.

It’s a very expensive mistake to give control of design issues to the banker and to give control of economic issues to the architect. Those aren’t their areas of expertise.

However, it is a very expensive mistake not to involve the architect throughout the entire decision-making process, way before the design stage. An architect cannot be expected to provide appropriate, cost-effective designs if he or she hasn’t been part of the thinking process from the beginning.

There is always a temptation but it can be an expensive mistake to over improve for the likely market. If the top rents in town are $8 per square foot per year it won’t work to spend so much money that you’d have to get $25 in rents. Keep in mind that it is the marketplace that sets the rents, not the landlord.

An unforgivable mistake in my mind is not having early discussion with the regulators. This means the local building inspector, the zoning official, and, in the case of historic building rehabilitation, the State Historic Preservation Office. Don’t even be sweeping the pigeon droppings out of the upper floors until you’ve walked through the building and talked with the regulatory officials about what you’ll need to do to get their approvals, or what areas you’ll need to work out some compromises.

If only one sentence in this entire article sticks in your head, let it be this: never, ever, ever use an architect or a general contractor on the rehabilitation of an historic building who has not successfully completed historic rehabilitations in the past. That is the most expensive mistake you can make.

Going Forward
Finally, the mayor, the president of the historic society and the chamber of commerce director will want to define success as cutting the ribbon on opening day. Not so. That is the beginning of the test of success. Real estate success is measured in the long term, and if you don’t control costs after completion it will be an expensive mistake.

The adaptive reuse of industrial buildings is incredibly important on a number of levels: sustainable development, economic development, historic preservation, Smart Growth and others.

And the best news is, there is money to be made by doing the right thing. SUR