When Retail-to-Residential Conversions Make Sense

There has been much discussion around converting older office buildings into multifamily residences. Less has been said about a similar strategy for retail that has become obsolete but many of the same advantages and disadvantages apply here as well. 

The successful redevelopment of a commercial property or underutilized site can pay significant dividends for a real estate owner. Exploring what the highest and best use of a particular property can mean the difference between an investment that cash flows and one that sits vacant. If an owner has an under-leased or underutilized retail property, for example, converting a portion of it to multifamily or mixed-use introduces an immediate and direct customer base for the remaining stores. In other scenarios, investors may have small-footprint properties on large parcels of land. By demolishing the existing improvements and building vertically, the increased density translates to increased value.