In today’s market, designing for flexibility is essential

The end of October was a whirlwind of activity involving the issues of infrastructure, economic vitality, utility/energy costs and regional competitiveness in the 21st century global economy.

Serving on committees in Manchester and Concord, as well as on the Community Technical Assistance Program for the widening of Interstate 93 from Salem to Manchester, the state Department of Transportation’s Long Range Transportation Business Plan and the I-93 Bow-Concord Steering Committee, it is easy for me to see the commonality of issues and themes in southern and central New Hampshire.

As a commercial real estate practitioner, all these issues are in front of me and our clients every day. We are continuing to shed industrial and manufacturing jobs in New England and throughout the United States. This frees up facilities that need to find new uses. If they are “high bay” with clear floor-to-ceiling heights of at least 16 feet, their new use is likely to be warehousing, distribution and/or logistics/freight forwarding. But not every one of these facilities can or need to be warehouses. What else can they be? In Concord, the new owners have converted the former O.D. Hopkins building into a mixed-use facility including batting cages and indoor soccer!

The dark side of this transition is the loss of jobs. We are currently marketing for sale a 200,000 square-foot manufacturing facility in Bow/Concord. This facility had over 160 manufacturing jobs a year ago. In its new warehouse use, it may yield 30 or 50 jobs. Unfortunately, this is a fact of life in the first decade of the 21st century.

But not all buildings work well for warehouse/distribution. Witness the huge old Digital buildings in Nashua that are multi-floor but with only 12- to 13-foot clear heights. Further, the loading docks are on one end of the building and the offices on another.

Also, many manufacturing buildings have “grown” over the years. They may have been 50,000 square feet in the 1960s, then doubled in the ‘70s, and added on to again in the ‘80s. They rarely subdivide well into multi-tenancy because they are A) simply too big, B) lack access on all sides for smaller tenants, or C) are not flexible enough to accommodate short-term (two to three years) flex-tech tenants without major retrofits that cost too much to make economic sense with the reasonably low market rents.

Another example is the large brick mill buildings. These heavy post-and-beam structures were typically built in 22- to 25-foot segments because that was the maximum length of the timbers, given their finished dimensions and ability to be lifted into place. So a building two bays wide (50-1/2 feet) can easily be converted to housing with exterior windows and a central corridor. But mills 100 to 160 feet in depth do not convert to housing because there simply are not enough windows.

In today’s environment, designing for flexibility is even more essential. Businesses come and go, so lease terms are shorter. Of our two dozen commercial and industrial listings, half will not continue in their previous use. A school will become an office building, a printing plant a warehouse, a church a medical office, a medical office a home for tech sales and customer support. Some buildings cannot change use and thus have to wait for demand for that type of space to rebound.

Two months ago, I spoke with an owner whose Route 128 office building in Massachusetts had been vacant for six to seven years (ouch!). He is now exploring tearing it down. The site can accommodate a Home Depot, Lowe’s or Stop ‘N Shop, and could be worth a lot more than a two-story office building. However, if retail or multifamily is not allowed, the site may not have an immediate use.

One strategy is to condominiumize these larger structures into smaller units for ownership. My brother is buying such a condominium for his expanding company in Waltham, Mass.

The daily challenges of trying to determine the highest and best use for these properties in the highly competitive global economy makes our job challenging, interesting and sometimes frustrating.

Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE), a Fellow of the Royal Institution of Chartered Surveyors (FRICS) and a member of the board of The Initiative for a 2020 Vision for Concord. He can be reached at wbn@nortonnewengland.com.