Transforming older or historic buildings with good bones into new hotels preserves the past while building the future. With the right approach, architects and interior designers can craft a modern hotel concept around properties with built-in histories that will offer guests authentic experiences and help revitalize communities.
Adaptive reuse projects have become more and more attractive to developers, especially since lending has been constricted in our uncertain economic environment and new hotel construction in the U.S. remains limited.
With capital constraints on one side of the equation, and true demand drivers on the other, Jeffrey Warwick, U.S. managing director for the vertically integrated real estate development, investment, and management company Portman Holdings, says development will be held back for a while. “The true key demand drivers for new product aren’t as fundamentally robust as they have been in past cycles,” Warwick says from his Atlanta office. “It’s going to be a while before we see the sustainability of demand drivers for new product. There will be some, as we see in multi-family, but in the broader real estate market it’s not going to be there.”
One of the only ways for developers to place capital into projects right now is to renovate, says Daniel Welborn, principal at the global hospitality design and development firm Gettys. “I think when that’s the case and there are only so many hotels in any given market that they can buy and renovate,” he says, “they start looking at other types of properties—office buildings being probably one of the main ones—that they can convert into a hotel.”
Warwick says the U.S. is experiencing a long cycle in real estate, and conversions and adaptive reuse projects traditionally happen between the acquisition and development cycles. “We’re at the beginning phase of the attractiveness of adaptive reuse, but I think it’s going to be different this time,” Warwick says. “That’s part of the exciting part of why we’re looking at it as an important component of our business plan going forward. The world is changing—it’s changing demographically, economically, and in so many different ways.”
As the United States prepares for the rapid growth of an additional 100 million people by 2050, Warwick says the country will undergo significant changes. He adds that 80 percent of the U.S. population is based in cities and that number will continue to rise. “If you extrapolate those numbers,” he says, “you can see how significantly dense the current cities and the emerging cities in the U.S. are going to become.”
While some U.S. cities are ahead of the curve and already have adaptive reuse and conversion programs set up, others do not. As cities become an even more critical portion of the U.S. and real estate world, Warwick says they will need to compete with each other for resources, such as jobs, housing, education, and health care. Given this backdrop, Warwick considers conversions and adaptive reuse to be more than just a trend.
“It’s somewhat of a seismic shift in what’s going to be happening,” Warwick says. “You will see conversions and adaptive reuse again as we would expect to see them in this cycle, but I think that transition is going to continue much longer than it has in the past for a myriad of reasons. I think it’s going to be an important piece of how cities are revitalized and how they compete for resources against other cities.”
Adaptive reuse projects are effective revitalization tools with significant benefits for cities, owners, and developers. They reduce vacant space, increase the tax base, and preserve buildings’ architectural and cultural significance. “It will encourage the development of live, work, and play communities, which we all know and love, creating a better balance to housing and jobs of course,” Warwick says.
Neighborhoods and communities embrace such projects when they are handled respectfully and maintain the integrity of the structure. “It doesn’t feel like we’re coming in and bulldozing—we’re actually coming in and embracing the vibe, the energy, and the culture of the community,” says Brian McGuinness, senior vice president of specialty select brands for Starwood Hotels & Resorts.
The loft-like design scheme, high ceilings, open floor plans, and large windows that are characteristic of Starwood’s select-service brand Aloft have made it well-suited for adaptive reuse projects. The brand’s first adaptive reuse project, which involved transforming a historic railroad freight depot in downtown Dallas, debuted in 2009.
When buildings have been around for a long time, they become institutions in the community. Repurposing buildings into hotels allows them to become an even bigger part of the community fabric. “I think as a developer, being able to find those types of assets to repurpose can really be a win-win because you already have a fan base built in,” Welborn says.
THE RIGHT BUILDING
A project’s success relies on choosing the right building, and there are always pluses and minuses involved with each project. There might be floor plan challenges, building codes to update, lead paint or asbestos to abate, special clearance requirements needed for historic buildings, or environmental limitations. “You can’t just take any building and reuse it as a hotel,” Welborn stresses. “You have to go in with your eyes wide open and know that it’s going to fit typical room bays. And that you’re going to be able to put in all the elements that an operating hotel needs.”
From an ongoing operations standpoint, McGuinness says older buildings require certain maintenance and upkeep that wouldn’t typically be necessary for a new build. “But at the end of the day,” he says, “it’s just a different challenge and a new build versus an old rehabilitation operate quite similarly.”
Ellis Katz, executive vice president and director of the hospitality studio for global architecture firm John Portman & Associates, sister company to Portman Holdings, says that while the residential building type is the closest in terms of building size and floor-to-floor height of hotels, other types of buildings can be reused as hotels. “We, as architects, enjoy the challenge of solving these types of design puzzles,” Katz says. “Each solution is unique to the individual building.”
For example, office buildings are normally planned with larger floor plates and wider column spacing. Katz says to convert that type of building to a hotel, architects must be creative in both unit size and mix to maximize the floor plate. “In some cases, that may mean a suite concept is a more suitable hotel type than a typical guestroom,” he says. “Or, you could capitalize on the unused interior space to create amenity space for the guest.” In many cases, however, office buildings tend to not be conducive to a typical double-loaded corridor hotel because of that larger floor plate, he says.
Although John Portman & Associates is primarily a ground-up new construction architect, the firm has looked at many projects over the years where creating a hotel from an office can work. One example Katz cites is the firm’s Tomorrow Square project, a 55-story mixed-use tower located on People’s Park in Shanghai. The program called for the building to be office use below and hotel use above.
“The project was well along in construction with the structure completed when the client was concerned that the market for office was too soft,” Katz explains. Through careful planning and coordination with the existing structure, John Portman & Associates successfully completed the conversion and Tomorrow Square is now a JW Marriott with Marriott Executive Apartments.
Gettys is in the process of converting the first 13 floors of a Ludwig Mies van der Rohe designed office building into The Langham Chicago hotel, which is scheduled to open in 2013. Formerly known as the IBM Building, the skyscraper was named a Chicago Landmark and is listed on the National Register of Historic Places.
The building is ideal, Welborn says, because it has the correct dimensions from the core to the façade, which works well for a typical five-star-hotel room bay. “So it’s really going in and doing an adaptive reuse and creating a building that’s now going to be multi-use,” he adds.
Gettys recently was awarded a design project that will involve renovating a medieval castle residence in New York from the late 1800s into a modern-day five-star boutique hotel. It was a residence until 1940, when it was home to a boy’s boarding school for a year. After, it served as the headquarters of an investment counseling business before becoming a luxury hotel in the early 1990s. “It’s been adaptively reused a couple of times,” Welborn says.
Condos and apartment complexes are frequently mined for adaptive reuse as well. Welborn mentions The Redbury in Los Angeles, which joined SBE Hotel Group’s portfolio in August 2011, as a good example of a condo building-turned-hotel. “They were able to deal with something that was more residential and then they created, essentially, an all-suite hotel,” he says.
Welborn advises that developers conduct due diligence and consider what will be gained and what needs to be added before jumping in and deciding to turn any building into a hotel. For instance, the property might need a new HVAC system or a new elevator core. “A developer who has developed a bunch of hotels will know what those elements are,” he says, “but it’s a really good idea for them to also engage somebody who really understands renovation.”
COST EFFECTIVE AND SUSTAINABLE
Adaptive reuse is typically more cost effective than new-build construction, but it depends on the individual project. “You can spend more money doing what really affects people, which is really the interiors, some of the façade work, and porte-cochere, and not spend all of your money putting foundations in and structural elements in the ground and things people never really see anyway,” Welborn says.
With adaptive reuse projects, developers can benefit from zoning opportunities and public subsidies. For example, the developer of the Aloft Orlando Downtown, scheduled to debut during the second quarter of 2013 in the former Orlando Utilities Commission building, will receive historic and new market tax credit financing from the Urban Development Fund and U.S. Bancorp Community Development Corporation.
The cities that really “get it,” Warwick says, are the ones that are providing incentives through tax credits and other means to bring capital and development to the area. “It’s a great partnership and marriage, and it begins with visionaries of the city who really want to make change and be competitive for resources,” he says.
If a developer can buy an existing building with the right structure and adapt it for below replacement cost, then it makes economical sense with or without tax incentives, Warwick says.
Not only does it make sense from an economic standpoint, it adds significant value to the community and city. “It adds value to everybody,” Warwick says. “It’s not just an economic play.”
From an environmental and sustainability standpoint, reusing an existing structure conserves resources. It reduces the energy required to create the hotel, as well as the raw material waste that would have come from demolishing an old building and rebuilding with new materials. “If you can repurpose it, reuse it, and change its use, obviously it’s better for the environment,” Welborn says. “That’s a very easy story to tell.”
“Sustainability is key to us,” McGuinness says. “The fact that we are reusing an old building is a really good feeling.
“That being said, it isn’t just dusting off the old, it’s infusing the old with the new,” he continues. “Having that ability to repurpose architecturally is quite beautiful, historic, and authentic to the neighborhood and the city. At the same time, in the interior spaces, we’re addressing the needs of the modern traveler.”
The adaptive reuse trend is not limited to the United States. Katz says John Portman & Associates recently completed an adaptive reuse project in Shanghai—Waldorf Astoria Shanghai on the Bund. The building was constructed in 1909 and is known by locals as the Dong Feng Hotel. Over the years, the building has taken on a number of roles, most famously as The Shanghai Club, which was a gentlemen’s club with a 110-foot Long Bar that primarily served expatriates. During World War II, the Japanese Navy seized the building as an officer’s club. Following the war, the communists took power, the club went bankrupt soon after, and the government appropriated the building. The bar was ripped out and much of the Western influences were purged. Then, in 1989, the former bar area became Shanghai’s original Kentucky Fried Chicken outlet.
“The building has gone through several dramatically different transformations in its life, but ultimately there is just no hiding the fact that it is meant to be ‘fabulous,’” Katz says.
John Portman & Associates wanted to maintain the integrity of the historic Bund district’s waterfront, and rejuvenate the Bund experience with the appropriate contemporary functions and active pedestrian venues while taking care to preserve and restore the original architectural character, Katz says.
The Waldorf Astoria Shanghai on the Bund came to be a two-building hotel complex with the century-old heritage building dubbed the Waldorf Astoria Club, and a newly-built annex building that offers views of the Huang Pu River called the Waldorf Astoria Tower.
Welborn worked on a project in Beijing that involved converting a historic mansion built in the 1700s into part of a boutique hotel. “It’s being done all over the world,” he says.
A LONG-TERM STRATEGY
Adaptive reuse will continue to be a more attractive and vital portion of developers’ business plans and hotel brand strategies. “To me, this isn’t just here we are through this cycle and it will come and go,” Warwick says. “I think it’s going to be here for a while because we are in a different era.”
McGuinness says Aloft is wholeheartedly bullish on adaptive reuse moving forward. “It may have been born out of the economic conditions of having equity out there but no debt, but it actually fits beautifully with the brand and quite frankly we love it,” McGuinness says.
In addition to the recently announced Aloft Orlando Downtown project, Aloft’s other projects include a mixed-use redevelopment in which a portion of the historic David Whitney Building in downtown Detroit is being converted into an Aloft. The hotel is scheduled to open in 2014.
Starwood also is in the process of converting and reconfiguring a former Clarion property that the company owns at San Francisco International Airport into an Aloft that will open in October. “It is a very old building and technically it’s a conversion but the level of work we’ve done there certainly would allow us to say that it’s adaptive reuse,” McGuinness says.
The acquisitions business in the United States is a new line of business for Portman Holdings, which has traditionally been a real estate developer. Adaptive reuse is an important component of that strategy, and the company has a number of conversions and adaptive reuse projects in the pipeline. From a macro perspective, Portman Holdings believes that adaptive reuse is a significant channel that brings revitalization to cities. “That’s why I’ve put it into our business model as something critical, not just from an economic perspective,” Warwick says, “but because it’s an opportunity for us and there’s a greater good to it.”