CREJ - Multifamily Properties Quarterly - January 2015
When commercial real estate properties are first built, developers aren’t thinking about how a new owner, 10 years down the road, needs that property to function in order to maximize profit. For example, it is not a current concern if multifamily properties will need to be changed to assisted-living properties, as the baby boomer generation needs more care in the next 20 years. Tenants of multifamily properties have different needs and space requirements than a retirement home or assisted-living facility. Maybe this should be a consideration from the start in order to secure the long-term success of the building. Typically, with multifamily, the type of unit that is popular at the time determines what the space requirements will be. With that in mind, there are several scenarios that owners may face with current buildings requiring updates. First is demand. It makes sense that if two- or three-bedroom units are in demand, those would be the easiest to rent and therefore most desirable for the owner. Depending on income levels and other factors, different size units are popular at different times. Also, in time, apartments may no longer be as in demand, because condos might become more profitable. If the Colorado construction defect law is changed in few years, it could be enticing for owners to convert an apartment building to more profitable condos. Another common consideration is to convert lower levels of a building into boutique retail stores. It’s encouraging to see new technology and practices that promote both building deconstruction and landfill construction waste diversion.’ – Brian Dunbar, Institute of the Built Environment Often the large costs associated with rehabbing existing buildings for a new or future need is detrimental. It would be valuable if an owner were able to reconfigure the interior of a building to match needs, as the neighborhood experiences change. A new technology makes interior reconfiguration a reality. A former Gensler architect and professor at Texas A&M University has developed a demountable drywall joint tape called Green-Zip. This tape is important because it creates interior versatility. If you think about the way the interiors of buildings are constructed, walls are set into place using studs and head rails. Then the doors, windows, plumbing and electrical are added. Drywall sections are put onto the frame to connect and cover up all of these items that make up the wall. Conventional drywall joint tape is installed and seals access to the entire wall, both inside and out. It seals so well that when someone wants to remodel or even do a plumbing repair, the only choice has been demolition (hammers and saws) and starting over with new materials. This is very expensive for the building owners. It also accounts for 23 percent of garbage in construction landfills, according to the U.S. Environmental Protection Agency. With a removable drywall joint tape, materials can be reused, including the drywall. Once the drywall is removed, studs can then be moved, allowing for the space to be reconfigured. The same drywall can be put back up to create that a new space using the same materials. Reconfiguring the interior saves $110 per lineal foot, or $1,100 savings for every 10 feet compared with demolition costs, according to a Turner Construction case study. Time and labor costs are also significantly less. Also, according to a Leadership in Energy & Environmental Design case study, demountable drywall tape diverts 70 percent to 90 percent of the building from landfills. If a building is working toward Gold LEED status, demountable tape can contribute up to five LEED points. “It’s encouraging to see new technology and practices that promote both building deconstruction and landfill construction waste diversion,” said Brian Dunbar, LEED fellow, executive director at Institute of the Built Environment. The Internal Revenue Service offers tax benefits because the demountable dry wall tape makes everything associated with a non load-bearing wall pass the test and become personal property. This changes the materials from a 39-year to a five-year depreciation. For the investor, this means an additional 8.1 percent return on equity, according to Real Estate Review. For companies using their own building, McGladrey accounting says that the tax benefits for a profitable company is equivalent to saving between $3 and $10 per square foot of floor space. The self-adhesive tape can save time and labor because no autotaping tools are needed for the first mud coat and there is no fourhour to two-day drying time. All of these benefits have an upfront cost of $1 to $1.70 per sf of floor space. A Barry Lynch, IFMA Fellow, case study shows return on investment to be 7:1. The new industry of changeable buildings is born with a simple idea of demountable dry wall tape.