Adaptive Reuse: Boom or Bust?

Adaptive reuse of older, unused, or under-used buildings is considered by many to be an important component of sustainable and environmentally-friendly development. Also, adaptive reuse is a concept that governmental officials, many developers, and some communities have embraced to revitalize older neighborhoods suffering from abandonment or general decline. Adaptive reuse may be the draw for residents and patrons as an inviting use of a cultural or historic resource, but it also may be a costly endeavor that outweighs the benefits. Regardless, renovating and re-using older buildings can be much more expensive than razing them and constructing new, even if there are significant environmental benefits from adaptive reuse. On the other hand, some evidence shows that it pays to reuse existing buildings because of the building character, the location, the savings from using an existing structure, and the government incentives for adaptive reuse. Therefore, the concept of adaptive reuse presents a complex array of questions about cost, urban character, history, and the environment that governmental officials, developers, communities, and potential new residents/tenants must consider. One of the largest questions that may confront any developer is that of regulation: adaptive reuse may present many challenges different from new construction.

One of the primary regulatory challenges that any developer contemplating adaptive reuse may encounter is historic preservation. Historic preservation laws are intended to ensure protection of historic buildings from unregulated alteration or demolition. Historic preservation laws and regulations, in some form, exist in every state in the United States, but they are typically administered at the local level. Historic preservation laws can range from providing incentives to encourage reuse of historic buildings to a strict review process for any developments that plan to alter historic buildings. The federal government offers tax incentives to developers that rehabilitate historic properties. Many local jurisdictions, like Boston, New York, and Washington, D.C. have robust historic preservation laws that establish regulatory bodies and allow for the designation of individual historic landmarks and historic districts. These jurisdictions also have regulations for the alteration and/or demolition of historic buildings. Because of their location or character, many buildings targeted for adaptive reuse are protected under historic preservation laws, so a developer may have to invest additional time and money into the process for allowing a building to undergo renovations consistent with applicable historic laws and regulations.

While adaptive reuse may promote many environmental benefits, a developer converting an old building into a modern and useable structure may confront multiple environmental regulatory challenges. Old buildings may contain hazardous materials that must be removed to comply with modern environmental standards. Each jurisdiction has laws about how hazardous materials must be handled when renovating an existing building for adaptive reuse. In addition, jurisdictions may have “green” or sustainable development laws that apply to reuse of existing buildings. In Washington D.C. for example, the extensive renovation of an existing building may trigger requirements for on-site storm water retention and a required minimum amount of on-site vegetation or green roof.

Finally, adaptive reuse of a building may invoke additional regulatory consideration concerning building structure and systems. Renovating a building for adaptive reuse may require compliance with modern building and fire codes, and the Americans with Disability Act.

Nevertheless, adaptive reuse has the potential to help revitalize neighborhoods and to promote sustainable development. The appeal of the unique character and history of adaptive reuse may be a worthwhile investment for a developer. However, these benefits have to be weighed against the regulatory costs associated with re-purposing existing buildings. Developers should consult counsel when deciding whether the benefits of adaptive reuse outweigh the potential regulatory costs and challenges.

Related topics: Development, Environmental, Green, Real Estate, Retail