This is the fifth post in our series on multifamily conversions. So far, we’ve covered:
- The history of multifamily conversions and the trends driving the current surge
- Office to apartment conversions
- Factory and hotel to apartment conversions
- Shopping mall to apartment conversions
In today’s post, we’ll look at converting old department stores and other types of vacant or obsolete buildings into new apartments.
The Decline of Department Stores
Besides shopping malls, another type of retail property that is increasingly being converted into apartments is old department stores.
Downtown department stores hit their peak in the early 1950s, then began a long, slow decline, the victim of suburban malls, industry consolidation and economic fluctuations. By the 1990s, many formerly bustling department stores sat vacant50.
Department Stores Are Good Candidates For Multifamily Conversion
Department stores make attractive targets for adaptive re-use to apartments, for several reasons:
- Location: Old department stores are often centrally located in the downtown areas of cities, which have become popular places to live due to the live-work-play ethos.
- Historic Tax Credits: Many old department stores have been designated historic landmarks, so developers that convert them into apartments may qualify for historic tax credits, making the project more enticing and profitable.
- Sturdy Construction: Many old department stores were built in the early 20th century, with steel-reinforced concrete, terrazzo floors to withstand heavy foot traffic and large freight elevators that are still building code compliant today.
- Aesthetic Design: The interiors and exteriors were designed to entice shoppers, so many old department stores are ornate and have tall ceilings and large windows. Due to their central-downtown location, many offer great city views.
One recent example is the former May Company department store in downtown Cleveland, a city landmark that opened its doors in 1915 and closed nearly 80 years later in 1993. The iconic building was converted into 307 luxury apartments with high end amenities and reopened in 2020 as The May on Public Square51.
Adaptive Reuse of Old Department Stores
Former department stores are being adapted for other uses besides apartments too. The former Dayton’s store in Minneapolis has been converted into a mixed-use development, with retail, dining and office space, while the former Marshall Field’s store in downtown Chicago houses a Macy’s department store on its lower floors and office space on its upper levels52.
Other Types of Multifamily Conversions
Other types of properties have been successfully converted into apartments too, though not as often as office buildings, factories, hotels and retail53. This includes:
- Healthcare- Old hospitals, with their large size, sturdy construction, ornate exteriors and often central location, are good candidates for adaptive reuse.
- Warehouses- Like factories, many old warehouses are solidly built and have open floor plans and unique, attractive features like exposed brick walls and ductwork.
- Schools- Older schools offer ample space and are often on large tracts of land.
- Military bases- The availability of federal tax credits are an added enticement to developers and investors.
- Financial- Old banks, with their thick walls, soaring ceilings and expansive lobbies, are ripe for conversions.
Play Ball!
On the outskirts of Indianapolis, an old minor league baseball stadium was successfully converted into apartments. Bush Stadium was built in 1931 and served as home to the minor league Indianapolis Indians until 1996, when the team moved to a new stadium. Bush Stadium was added to the National Register of Historic Places in 1995. But, after the team moved out, it was used for storing broken down cars and fell into disrepair.
A local multifamily developer who was actively involved in historic preservation conceived a plan to convert the crumbling stadium to apartments. With the help of partial city funding, the structure was converted into 138 high-end apartments with modern amenities.
Many Original Features From the Ballpark Were Retained
Many original elements of the stadium were kept intact, including the art deco limestone and brick façade, the main entrance, three of the stadium’s light towers and part of the outfield wall. The former infield was paved in dirt-colored concrete as a nod to the property’s past.
The project also recycled materials from the old baseball stadium, including 20,000 tons of concrete that was crushed and reused to level floors, and a portion of the seats, which are now used in city bus stops and parks.
The project was an immediate success; when the new Stadium Lofts apartment complex opened in August 2013, it was 100% leased54.
Expect Even More Multifamily Conversions
The number of multifamily conversions has been increasing for decades. But the lingering impacts of the Covid-19 pandemic, prevailing economic conditions, including persistent inflation and high interest rates, and the current state of the US housing market all make it likely that the trend will accelerate the next few years.
This is especially true of the office sector, which is reeling now from high and escalating vacancies due to a widespread post-pandemic shift to remote and hybrid work, and hotels, many of which were virtually empty at the height of the pandemic and never fully rebounded.
That shouldn’t be seen as a negative, however. Done right, multifamily conversions offer valuable benefits for everyone involved, including:
- Renters, through the availability of more unique and/or affordable housing
- Cities and Municipalities, by making more housing available for residents, especially affordable housing
- Developers, by the opportunity to bring projects to market more quickly, affordably and profitably
- Owners, by the opportunity to breathe new life into struggling properties
- Investors, from the opportunity to earn strong returns on their investments in adaptive reuse projects
- Capital Providers, through increased debt and equity opportunities from multifamily conversions
- The environment, because adaptive reuse has far less impact on the environment than new construction.
About The Author
Terry Banike is Realogic’s Vice President of Marketing. Over the course of his career, he has worked in marketing, communications, journalism and public relations, and has written numerous news stories and feature articles for newspapers, trade publications, newsletters and blogs. A rabid reader of anything and everything on commercial real estate, Terry closely follows commercial real estate news and trends and frequently posts about real estate on the Realogic Blog. He can be reached at tbanike@realogicinc.com.