Several converging trends are contributing to an increase in the number of real estate developers transforming older office parks into competitive mixed-use properties, introducing multifamily housing to create communities that offer an appealing live-work environment.
According to a report from the Urban Land Institute and PwC, Emerging Trends in Real Estate 2021, demand for rental housing in the suburbs will increase as more companies require, allow, or encourage working from home. This workplace shift, combined with the exodus from major cities as millennials seek more affordable housing options, continues to justify the revitalization of existing office complexes.
Below are insights into the challenges and key considerations in reimagining aging office parks and introducing residential and mixed-used elements.
Overcome Regulatory Issues
Introducing a change in property use will likely require an entitlement review with staff, and potentially zoning board approval for key issues such as density, traffic, stormwater management, and required parking. These issues can significantly impact the design and return on investment of the project. In addition, many local planning and zoning boards often mandate that any zoning or use change will only be authorized if the subject parcel is brought into compliance with existing site development and building code statutes. In general, a property owner has a better chance of approval when the rezoning request is consistent with the long-range general plan of the municipality. Land use general plans provide a foundation for zoning but should also allow for flexibility of future conditions and ideas.
Investigate Potential Infrastructure Improvements
Zoning and planning boards typically want to approve development projects that include infrastructure improvements to the community. The creation of needed new roads, sewer systems, landscaping, and donations of land to be used for other community projects are often considered as part of the developer's cost of doing business in the community. Requiring concurrency between infrastructure development and new construction is tempting for planning officials to use to slow down growth.
Analyze Site Circulation
Site circulation—both vehicular and pedestrian—is a critical design component to be considered when introducing a residential or retail use to an existing office park. Adding these elements may increase or reduce traffic, depending on the time of day, and certainly add to activity after the traditional nine-to-five office crowd has left for the day.
Understand Existing Utilities
Utilities’ site proximity is very important. Water, sewer, stormwater, gas, electric, fiber, and cable are all necessary for successful residential development.
In many ways, introducing residential use in an existing office park can be more predictable than a greenfield site development project. Rather than dealing with greenfield permitting issues, unknown soil conditions, and new stormwater management systems, typically there is an orderly routing of utilities, allowing siting solutions to be determined more efficiently. The critical issue is to determine whether the increased density will require increased infrastructure capacity as well.
Multifamily Housing Supports Community Growth
Sandy Springs, the sixth largest city in Georgia and the second largest city in the metropolitan Atlanta area, has experienced strong and steady population growth over the past decade due to several major corporate expansions and relocations, including Mercedes-Benz and State Farm Insurance. With excellent access to local highways and two MARTA train stations, the community also has a high share of college-educated households, with incomes exceeding the Atlanta metro average.
Recognizing the need to provide additional multifamily housing options, the city approved a request to rezone a parcel within an existing office park that had originally been master-planned and zoned for an office component to a new multifamily use. The office park owner and the developer, Vista Realty Partners, had to present careful analysis of the change of land use.
Parking requirements posed the biggest challenge, as the topography of the site was very steep. Structured parking was considered, but creative grading allowed for a surface parking solution. Originally, the office building would have been a much smaller overall development. Evaluation of the existing utilities was critical to determine if the existing water and sewer systems could handle the substituted residential component.
The project is in an area of greater Atlanta where multifamily projects have been traditional in character. Because the site was in an office park, the design team recommended a more contemporary aesthetic that complemented the adjacent buildings.
Another excellent example of breathing new life into an existing office park is The Bishop, also in Sandy Springs. This urban mixed-use development consists of more than 375,000 square feet of residential, retail, and office space in the suburban Perimeter Center area. With a mix of REIT equity and bank financing, commercial real estate developer RangeWater (formerly Pollack Shores Real Estate Group) was able to leverage a very competitive land cost basis, converting the existing surface parking supporting two office buildings into multifamily buildings with structured parking.
The project had hurdles to overcome. Even though original civil permit drawings were available, the team decided to invest in a full survey of the site and underground utilities, including ground-penetrating radar out of concern that new structural foundations could potentially interfere with existing utilities. Even with the radar mapping, field adjustments were required to avoid existing utilities during site grading and excavation.
While there was strong support from the office owner who sold the land for the project, local zoning authorities were concerned about approving Type 3 wood-frame multifamily construction. Evidence of the adequacy of modern NFPA fire sprinklers overcame this life safety issue.
With the existing site components immediately adjacent to the new apartments, protecting employees and visitors during construction was a major concern, especially regarding traffic and parking. A new garage on the south end of the property was constructed to replace the surface parking that became the site for the apartment buildings. Unfortunately, to avoid blocking daytime traffic, the new south garage could only be erected at night. However, the city would not allow deliveries at night, so the precast concrete panels and tees had to be delivered to another location on the site away from the offices and then moved through the existing office drives after hours.
The new Bishop apartment complex transformed the suburban office park by creating a lively mixed-use streetscape complete with a public plaza and green space for the enjoyment of residents and office tenants. Its pedestrian walkways allow easy access to restaurants, retail, and a nearby Starbucks.
Increased Residential Density = Higher Property Values
Peachtree Corners is another emerging suburban Atlanta city focused on transforming itself from an office park environment to a true live, work, play community. It has been supportive of inserting new multifamily housing into its existing office parks. Atlanta real estate developer Brand Properties assembled several parcels within Technology Park, a sprawling development initiated in the 1970s with numerous low-rise brick office buildings. Two buildings were demolished, and Brand constructed the 296-unit Echo Lakeside apartments on the site.
The land assemblage presented significant challenges in the planning phase due to the steep terrain of the overall site. To compensate for the drop in elevation, the project incorporates full-story steps and terrace levels. The project marketing was immediately successful, with demand far greater than expected. Brand was able to pre-lease the property at a higher rate than any of their previous properties, and leasing has remained high since the development opened. Prior to demolishing the office buildings for the new apartments, the office park property sold twice, once for $2.2 million in 1995, then again for $2.8 million in 2004, according to Gwinnett County real estate records. Brand Properties recently sold the multifamily property to Cortland Properties for $66.1 million.
The project offers several distinctive features including a uniquely shaped pool, co-working spaces, and a fitness center. It is bordered by two lakes where residents can fish and includes a boat dock for kayaking and an outdoor cabana/lounge. Land donated back to the city was developed to complete a pedestrian trail connecting to an 11.5-mile multiuse nature trail system winding throughout Peachtree Corners.
As the suburban office market responds to new work-from-home policies and changing demographics, many more office parks may become available for development. Savvy developers have an opportunity to take the lead in reshaping how aging office parks can be transformed to meet evolving living and work lifestyles.