Adaptive Reuse, Demolition, or Deconstruction: Determining the Future of Vacant Commercial Buildings

Propmodo, a digital platform dedicated to exploring the intersection of real estate, technology, and construction, recently examined the growing trends in adaptive reuse, the financial implications for landlords and developers, and why some opt for demolition over renovation.

As the cost and complexity of repurposing older properties increase, particularly those over 50 years old, strategic decisions around adaptive reuse and deconstruction are becoming more critical for the architectural and engineering sectors.

Smaller developers often have no financial option to pursue adaptive reuse because it can cost as much as $450 per square foot. By contrast, demolition can be accomplished for as little as $8 per square foot.

Rationale for Demolishing Office Buildings

The average age of office buildings in the U.S. is 50 years, with many structures dating back to the 1970s or earlier. Without continuous investment in maintenance, repairs, and operations (MRO), the upfront costs of retrofitting these buildings to meet current regulations and sustainable building practices can become prohibitive. For smaller property portfolios, particularly, the financial demands of adaptive reuse can be overwhelming, especially when compounded by modern climate considerations.

Propmodo reports that “small landlords needing more capital or knowledge to complete conversion projects face more challenges. Some are turning to the wrecking ball instead.” Corian Enterprises’ CEO, Fred Cordova, underscored the role of location in these decisions, stating in Fortune (February 2024):

“There will be a bifurcation. The product in a good location with a good, safe environment will recover… And then you have the others that are basically worth nothing—the D class. Those just have to be torn down. That’s probably at least 30% of all offices in the country.”

Commercial properties are graded by class (A, B, C, and D), with Class A buildings being the most modern and desirable due to high-grade materials, advanced HVAC & MEP systems, and desirable design features. In contrast, Class D properties are typically older than 30 years, often lack updates, and are located in areas with limited access to amenities, making them less attractive to investors and financiers. Adaptive reuse, while gaining traction, faces significant hurdles for properties in these lower tiers.

Adaptive Reuse for Iconic Buildings: A Large-Scale Developer’s Approach

A tale of two icons: The Flatiron Building in New York and Frank Lloyd Wright’s only skyscraper – Price Tower, located in Bartlesville, Oklahoma, may have very different futures. The Brodsky Organization is adapting the Flatiron into luxury condominiums while Price Tower is awaiting an auction fraught with legal peril.

High-profile developers such as SL Green, Silverstein Properties, and RXR Realty dominate the headlines for adaptive reuse projects. These companies possess the financial resources and experience needed for high-cost renovations of iconic structures. Recently, Existing Conditions highlighted the ongoing adaptive reuse project at New York’s Flatiron Building, demonstrating how prime location and historic architecture can make such projects viable for large developers with deep resources.

In contrast, Frank Lloyd Wright’s only skyscraper, Price Tower in Bartlesville, Oklahoma, may face demolition. Despite its architectural significance, its location in a less economically vibrant area makes adaptive reuse challenging. Existing Conditions’ President, Jared Curtis, emphasized that “adaptive reuse or significant investment in Price Tower is objectively less viable compared to many other properties in more strategically positioned urban centers,” highlighting how geographic and economic factors often dictate project feasibility.

Choosing Between Adaptation, Deconstruction, or Demolition

Trends observed by Axios indicate a significant rise in demolitions post-pandemic, with over 20 million square feet of commercial space demolished in 2022 alone, and 14.7 million square feet cleared in just the first half of 2023. For stakeholders considering demolition, several key factors should inform their decision, including the purpose of the demolition, budget constraints, and project timeline.

Questions to address when assessing demolition versus deconstruction include:

• Is the goal solely to clear the space for new construction?
• What is the project timeline?
• What is the demolition budget?

For projects requiring a quick solution, demolition might be preferable. However, due diligence remains essential: accurate site preparation, such as locating public and private utility lines, assessing surrounding impacts, and implementing environmental safeguards, is necessary even in rapid demolitions.

Alternatively, projects with more flexible timelines might consider deconstruction, salvaging materials for tax incentives, or resale. Though the upfront costs of deconstruction are higher, the environmental impact is notably reduced. Repurposing materials for reuse can lower environmental impact by up to twelve times compared to traditional demolition, a significant consideration for projects seeking to meet Environmental, Social, and Governance (ESG) standards.

Financial and Environmental Considerations in Commercial Demolition

The Global Status Report for Buildings and Construction (2020) revealed that the civil construction sector generates 38% of global CO2 emissions. As U.S. construction trends increasingly emphasize sustainability, reducing carbon emissions has become a priority, aligning with national ESG goals and prompting companies to incorporate environmentally conscious methods in their demolition and renovation projects.

Traditional demolition for commercial properties costs approximately $8 per square foot and can reach $25,000 for single-family homes if the foundation remains intact. By contrast, adaptive reuse costs have escalated, with developers like Corian’s Cordova noting that conversions, once priced between $75 and $150 per square foot, now average $350 per square foot for standard properties and up to $450 for high-end projects. While cost-intensive, federal and local adaptive reuse programs offer grants, tax credits, and subsidies. Additionally, the Biden administration has earmarked $35 billion in low-interest loans specifically to support adaptive reuse, easing the financial burden for developers committed to sustainable building practices.

Regardless of the path chosen—adaptive reuse, deconstruction, or demolition—detailed site preparation, documentation of existing conditions, and data management are integral to ensuring project safety and success. Existing Conditions provides critical services for architects, engineers, and contractors, ensuring precision in visualizing and managing the built environment.