“When you’ve got a lot of empty space just sitting there, there are no benefits for anyone. Not your community, not your NOI, and certainly not your existing tenants and or customers,” Hancock says.

The retail sector is evolving. Many tenants already struggling to survive the threat of e-commerce faced a new challenge with the global pandemic. In some situations, retail space has been reimagined through a renovation or an adaptive reuse project. Who better to advise these tenants, owners and investors on the use of their properties than the property managers most familiar with the functionality of commercial real estate assets?

“Occupancy is always on a property manager’s radar,” says Kaci Hancock, CPM, ACoM, current president of IREM Houston and operations director for REIS Associates. “When it comes to a property manager’s involvement in repurposing those spaces, we like to be included in those conversations.”

For example, at one REIS Associates shopping center, the leasing team wanted to add a pop-up art museum. But Hancock informed them the space couldn’t accommodate the museum’s electrical requirements. So instead, she suggested adding a pop-up clothing store, or something similar to the center’s adjacent retail uses.

“Sometimes leasing already has in mind a particular use for a space,” Hancock says. “When we catch wind of it, it might be a month or so later or after the LOI [Letter of Intent] has been drafted. Sometimes we have to go back and say, ‘This is not going to work. Or, if this is going to work, these are the changes that need to be made to accommodate this new use.’”

While property management’s involvement in the conversion process can vary by real estate company, Hancock says on-site associates need to build a solid relationship with the leasing team.

“It’s the property manager’s responsibility to cultivate that relationship with their leasing team,” Hancock says. “Once they can trust that you are familiar with their property, and that you can provide viable input, they rely on your expertise a little more and lean toward your suggestions.”

If property managers can successfully cultivate these relationships, it will position them to affect what looks like a growing number of adaptive reuse projects in the future. While reuse isn’t new, Hancock thinks more projects are coming soon.

“We definitely see a growth in the area, and I don’t think it’s temporary at all,” Hancock says.

The many potential reuse options for large retail spaces inside shopping centers intrigues Hancock, including indoor farms, exercise areas, food halls that serve as ghost kitchens, and pop-up retail stores.

“Retail tenants have had five, six or 10-year leases, and some could not sustain those particular terms throughout the pandemic,” Hancock says. “So, you bring in a tenant who wants to come in for six months to a year. You’re constantly flipping that space with new pop-up varieties on a six-month or annual basis. And then, the asset continues to generate income.” While there are barriers to adaptive reuse projects, such as zoning restrictions, issues with building envelopes, governmental regulations and hazardous material abatement, Hancock thinks the positives outweigh the negatives with these products.

“When you’ve got a lot of empty space just sitting there, there are no benefits for anyone. Not your community, not your NOI (net operating income), and certainly not your existing tenants and or customers,” Hancock says. “It’s just unused space sitting there waiting for someone to repurpose. So, if you can find a new use or adaptive reuse of that site, it’s in everybody’s best interest.”