About a year ago the Naturally Occurring Cultural Districts (NOCD) working group asked your Man About Town to write a nice, juicy case study about what happens when cultural organizations buy non-cultural facilities and fix them up. This three part series details my findings, although it’s well worth checking out the original report to see case studies from nearly a dozen cultural organizations across the country.
You may also want to visit the Tumblr site I set up for this report, which includes additional links to a variety of additional resources for cultural organizations seeking their first home.
What the hell is “Adaptive Reuse?”
Nonprofit cultural leaders, like most of us, are involved in very few real estate transactions throughout our lifetimes. Whether seeking to rent or to own, we usually have limited experience in the various stages of the process: finding something we can afford in a decent location, dealing with the complications of signing a contract, figuring out how to go about fixing up the space to suit our needs and aesthetics, and maintaining it over the lifetime of our residency.
That’s why many cultural organizations turn the strategy of “adaptive reuse.” This process concerns the acquisition and rehabilitation of spaces for development into cultural venues, and particularly concerns those spaces that were not initially built for creative sector purposes (former industrial buildings, firehouses, schools, churches), or that were built for a previous cultural use and repurposed for a new one (former vaudeville houses, movie theaters).
The decision to acquire and develop an adaptive reuse facility is as much an inspired, creative decision as a practical one connected to plans for organizational growth. Indeed, the process of taking on an adaptive reuse project almost always inspires change for the nonprofit cultural organization in turn: affecting programs and funding priorities, developing alliances and stakeholder relationships, and even altering its relationship to creative sector peers. The transformative nature of making a home through adaptive reuse can be profound.
Easier Turned into a Case Study Than Done
But nonprofit culturals face a number of additional challenges that can make the process far more difficult, requiring longer development time lines, greater expertise, and substantial pools of both labor and capital. And while adaptive reuse is generally a less expensive approach to developing a cultural facility in comparison with new construction, it can pose unique problems of its own. For instance:
- Locating development sites. There are no brokers, listing services, or exchanges that track available spaces suitable for adaptive reuse. Every acquisition is therefore the result of a specialized search, usually conducted by the cultural practitioners themselves.
- Acquisition. The vast majority of cultural organizations are relatively small (with less than $250,000 in annual revenues), but many have substantial space needs for accommodating their creative practice – making the cost disproportionately high. In addition, very few nonprofit culturals have the capital needed to acquire space outright and so must engage in substantial fund- raising from public and private sources. This is usually a lengthy and laborious process.
- Closing. Whether negotiating for a lease or the purchase of property, both the relative rarity and “custom made” nature of these transactions means there are few examples of legal templates or contracts to guide decision making. In addition, access to proper legal guidance may be difficult to obtain, given cost constraints.
- Construction and improvement. Spaces in adaptive reuse projects are usually “fixer-uppers,” to say the least. Many require substantial renovation to make them safe and habitable, in addition to specialized alterations to meet the needs of the designated creative use.
- Ongoing management. In general cultural facilities tend to have a larger physical footprint, meaning that there is just more upkeep to do. In addition, to cover the larger operating costs associated with their size, many facilities provide rentals or the option to share spaces with several creative sector partners. This requires stronger administration, negotiation of boundaries and responsibilities, and higher levels of operational care than does a single-tenant property.
- Public sector bureaucracy. Projects funded through public sources or engaging with public sector construction partners can face a bewildering array of bureaucratic procedures, experience substantial planning and funding delays, and even face political pressures affecting the development of the facility. Many case study examples noted the importance of maintaining strong relationships with local elected leaders and governmental partners and of seeking the mentorship of others who have gone through the experience before.
In spite of these challenges, adaptive reuse is happening all the time. There are many examples from a wide variety of real estate environments, including both “hot” markets, where increased competition tends to drive up real estate values, and “cold” markets, where population decline and surplus real estate has resulted in vacancies and (often) blight. The successful projects tend to share a number of characteristics, such as the following:
- A “love at first site” component, where the nature of the venue itself seems to invite the possibility of conversion. Many projects have “good bones,” with deteriorated but compelling design or structural elements.
- A process of public engagement around the planning, development, and ongoing programming of the site. This is especially true for buildings with a history of public use that the community wants maintained in any future use.
- Access to substantial sources of public funding and the presence of strong connections to elected and appointed public leaders.
- Clear lines of leadership and decision-making, especially when multiple creative sector partners are involved.
- The engagement of outside professionals in real estate finance and construction management as advisors or, if funds allow, as hired supports.
- The ability to develop a business model that supports operations while meeting creative objectives. While no two projects are the same, deeper analysis of these common characteristics can provide useful insights and support to those seeking to conduct their own adaptive reuse engagements.
Stay Tuned for part two of this three part series: the key components.