Mazyar Mortazavi is the President and CEO of TAS, an unconventional impact company using real estate as a tool to drive profit and purpose.
Repositioning commercial buildings into community hubs is a tangible example of the power of impact investing, and is an initiative my company is pursuing to generate financial value while also creating a tangible, positive impact.
The Case For Retrofitting And Adaptive Reuse
I believe repositioning and retrofitting commercial properties, especially those that are older, vacant or underutilized, is critical to the real estate development industry’s efforts to achieve net-zero targets. Bypassing wasteful demolition and reconstruction and maximizing the diversion of waste from landfills in itself is a major argument for repositioning. However, revitalizing existing properties also has additional sustainable benefits including significant opportunities for carbon emission reductions, improved energy efficiency and enhanced air quality.
The approach of reusing existing structures and materials is greener and more cost-effective than new construction. Moreover, there is increasing demand from tenants who are starting to see retrofit buildings as part of a wider approach to sustainability and a solution to the global climate crisis.
Delivering Impact And Increasing Community Connectivity
Most cities have stocks of underutilized and often rundown commercial and industrial spaces. The first instinct for some developers is to demolish these structures and rebuild them from the ground up. However, these properties have great potential for innovative retrofitting and adaptive reuse.
Community hubs are opportunities to create lively spaces and deliver often missing critical social infrastructure in formerly neglected buildings. When developed correctly, they can serve as a place to bring people, commerce and ideas together under one roof. The reach of these community hubs or clusters extends beyond the structural walls of the buildings; they can reconnect people with their neighborhoods by creating spaces that integrate social and functional needs, especially when the leasing strategy makes intentional choices about the tenant mix.
By combining a vibrant variety of tenants, small businesses, social enterprises and not-for-profit sectors, developers can create a destination that encourages pedestrian traffic while providing inclusive and accessible spaces. This can promote collaboration and enhance the asset’s long-term financial resilience.
To further drive impact, these community hubs can forge strategic partnerships and offer below-market rents to impact-aligned tenants that might otherwise not be able to take space in the building and could be lost to the community. These partnerships, in turn, create value for market-rate tenants by offering a community benefit for their employees that aligns with corporate values and supports employee retention efforts.
By collaborating with universities, local government, NFP partners and financial institutions—as well as local partners and community members—developers can better create programs beyond their site boundaries to benefit residents and keep up with redevelopment trends. Additionally, retrofitting existing buildings can stimulate investment, job creation and consumer spending in the neighborhood.
Revitalization Versus Gentrification
The simple act of investing in and revitalizing a neighborhood can be seen as gentrification because it typically attracts new, often wealthier residents. These residents then draw in new businesses, amenities and services that are geared to them, and this can mean that the goods and services that previous residents counted on can disappear. Inevitably, the original residents are displaced, and the neighborhood culture is erased.
Therefore, it’s important to design these community hubs to accommodate both new and existing residents in order to help prevent gentrification while promoting the revitalization of a neighborhood. Moreover, when these hubs are retrofitted, they can preserve the heritage and aesthetic value of both the building and the surrounding neighborhood.
Where To Begin
Developers looking to create the most impact should focus their acquisition strategy on neighborhoods that lack social infrastructure, have a history of disinvestment or are currently underserved. There are many inner-city suburbs that have vibrant, active communities that lack spaces to gather or are missing the services and amenities they need to thrive. These are the neighborhoods where community hubs can make a huge difference.
It is equally important to listen to and engage with the local communities to better understand their needs and discover opportunities. It is a mistake for us to assume we know what a neighborhood needs.
Of course, we must also assess the health and soundness of the existing structure, capacity for increased density and opportunities for increasing sustainability—whether it is through solar panels, water-sensitive urban design measures or other initiatives. Conversely, we will have to identify any major constraints or challenges, such as envelope quality, hazardous substances, heritage designations or zoning restrictions.
Once we have a property in mind, it is important to determine whether existing tenants serve niche community needs or create significant employment. If so, we must consider how these types of tenants might be incorporated into the repositioned project.
Before work even begins on a community hub, there is also an incredible opportunity to test and pilot new businesses. Meanwhile uses and on-site activations test programming that can be later integrated permanently. Since these spaces are temporary, they also allow for below-market and flexible leasing strategies to support local businesses or incubate new, innovative enterprises. These alternative leasing programs may also be incorporated into the permanent strategy to address gentrification and keep culturally relevant, affordable goods and services in the neighborhood.
A Shift In Thinking
Revitalizing neighborhoods through retrofitted community hubs can help drive both purpose and profit as a win-win for developers and their projects, but it is far from standard practice. Before we see more of these strategies play out, we will need a shift in the way the industry considers development. Developers need to focus on the operation of assets over the long term, rather than just the projects themselves.
By adopting a longer-term focus coupled with a social and environmental lens, the real estate industry can deploy capital to build commercial properties in neighborhoods that deliver both profit and purpose. Developers can deliver significant financial value while, at the same time, driving impact for the local communities where those assets are located. By doing so, our industry, in collaboration with local businesses and residents, can rally together to create and implement innovative solutions to address the many challenges facing cities today.
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