In dog years, some markets are ancient. But in people years, it’s not even time for the mid-life crisis.
The Baltimore metropolitan area continues to age in place at a rapid pace, creating opportunities for developers, tenants and owners alike. The opportunities are not without challenges, however.
What happens to a property as time passes, suggests a “withering” away of value. As properties age in place, they approach the tipping point – that moment in time when the market realizes that there is a higher and better use for the property. The challenge is recognizing what properties are aging in place, where the property is relative to its tipping point, and what the threats are to executing a plan to redevelop the property / site.
Some properties will be what they are for the foreseeable future, with no redevelopment to another use projected for some time. The aging in place idea requires keen familiarity with the marketplace in terms of traffic patterns, current and future demand generators, the price of land, and the costs of redevelopment.
Often, the property is close to, but not at, its optimum point for redevelopment. This occurs when extrinsic events need to occur prior to a redevelopment. Spotting those events (road widening, interchange realignment, etc.) may be just the key to placing certain properties in the sweet spot for redevelopment. Other times, an existing tenant’s lease needs to burn off some time in order to make a buyout financially possible (or expire naturally).
The next step is identifying the threats to redevelopment – often zoning related. Fortunately, as properties age in place the uses that may be feasible are a reflection of other dynamics in the market that must be recognized by the municipal authorities. Traffic studies can confirm use patterns, and tenant viability can be a barometer of what’s going on at a particular location.
Finally, as with most real estate, the devil is in the execution. A well-thought out budget and a professionally-scripted marketing plan are key. Follow-through from the brokerage side is a given.
The dynamic of aging in place is here to stay and will accelerate due to the continued run-up in land values. As counties approach full build-out within the next decade, and redevelopment skills are either honed locally or imported, you will see this process occur with more regularity. Given the number of properties that were built in cycles as our market matured, there should be a strong inventory of properties that are now approaching their own tipping points and, with a little help, can serve a higher and better use in their next lives.