Investors Don’t Fear Vacancies

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CHICAGO—As bid-up pricing results in lower returns, especially in prime office markets, investors are turning to a new strategy, according to Transwestern’s Gary Nussbaum. That is, they’re becoming more opportunistic, buying buildings with substantial or total vacancies.

chi_311It’s not only the lower returns on stabilized assets that have motivated investors to accept more risk—and, often, pay higher prices on vacant, nearly vacant or soon to be vacant office properties, writes Nussbaum, Chicago-based managing director, investment services. They’re also finding more debt sources willing to lend on opportunistic deals.

“In order to increase their returns, some lenders have been willing to finance the acquisition of vacant buildings, offering interest-only, debt fund financing at 65% loan-to-value” as well as providing 100% of the cap-ex funding, Nussbaum writes in a special report. Interest rates, meanwhile, have been as aggressive as sub-6%. “Terms are improving because more debt sources are loaning on these non-core assets.”

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A New Life for Dead Malls

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In case you haven’t heard, suburban malls are on the way out (sorry Paul Blart). Some have become abandoned wastelands popular for ruin porn. Others have been torn down and turned into industrial sites.

According to Ellen Dunham-Jones, an architect and professor at Georgia Tech, there are about 1,200 enclosed malls in the United States, and about one-third of them are dead or dying. That’s because developers rapidly overbuilt malls in the 20th century, she said: The U.S. has twice as much square footage in shopping centers per capita than the rest of the world, and six times as much as countries in Europe.

“The malls died for a reason,” she told me. “We were way over retailed.”

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5 Ways to Redevelop a Vacant Armory

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beautiful Cranston Street Armory in Providence, RI.

Armories in the United States were built in the 19th and 20th centuries by local and state militias to store weapons and to train volunteer soldiers. Armories typically have a large interior space that was used for drills and rooms used for weapons storage and administrative offices. With the reorganization of many local and state militia groups under the federal National Guard, today armories in their original form are typically vacant or underutilized.

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Blot Out Blight: 3 Ways to Turn Around a Vacant Lot

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Joe Sandmann "Beer Garden"

Tactical urbanist humor is the best. (Artist: Joe Sandmann)
Sometimes you see a vacant lot or run down space that is just asking for some change. No matter what the size — whether it’s intimidatingly large or frustratingly small — there is a project that can activate the space.

It’s hard to start from square one, so here are 3 vacant lot transformations that have been successful for individuals and groups in the OpportunitySpace sphere to get you thinking about your own project.


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