Industrial-to-Office Conversion Satisfies Appetite for Adaptive Reuse

Historically, the downtown core of most cities is where office buildings have seen the most demand — and where owners have been able to garner the highest rents. But as the lingering impact of the pandemic continues to shift tenant priorities for physical office space, other formats and locations outside the central business district are commanding attention.

Take The Cannon — a Houston coworking tech hub and entrepreneur-centric office building inside a renovated 1950s industrial warehouse about 20 minutes from downtown. Here, long-term office leases in the fully-occupied building are clocking about $10 more per square foot than Williams Tower, one of the city’s most iconic buildings, according to Paul Coonrod, founder and managing principal of Houston real estate investment company Pagewood.

With this disparity, Coonrod saw an opportunity to capitalize on the appetite for adaptive reuse projects and pursue multiple industrial-to-office conversions on a two-acre lot adjacent to The Cannon, where Pagewood currently has its office.

Last year, Pagewood, along with Houston-based investment firm Wile Interests, purchased four, single-story metal warehouse buildings that measure about 10,000 square feet each. Pagewood and Wile Interests partnered with Mark Odom Studio, a Texas architecture firm that has worked on innovative projects in the state including a retail and coworking park made of shipping containers and other conversion projects.

Together, the companies are transforming the former early 2000s-built music recording and practice studio buildings into a 40,000-square-foot creative office community dubbed The Quad.

The conversion project seeks not only to bring a unique, creative office offering to Houston, but also to satisfy the fervent tenant demand for adaptive reuse projects in a market where supply is lacking. Based on Pagewood’s analysis, Houston has a deficit of adaptive reuse projects, particularly given that it’s one of the country’s largest office markets.

“We’re students of the market, and so we go where there are the biggest market inefficiencies,” said Coonrod. “Demand [for adaptive reuse] is outpacing supply, so we are looking to create that supply. Wherever [adaptive reuse space has] been created, we’ve seen a disproportionate amount of absorption compared to traditional office.”

The existing buildings’ location played a significant factor in Pagewood’s acquisition strategy. Coonrod noted that The Quad’s site at the intersection of Interstate 10 and The Sam Houston Tollway puts it in one of the most affluent areas of Houston, and in one of the only pockets of that area that isn’t yet fully developed.

“There are a lot of decision makers over here, and it’s an area that’s been rapidly growing to the west and north,” he told LoopNet. “So, it’s in the path of Houston’s growth, and this pocket is seeing a good surge in demand for small- to medium-size tenants. So we will be in a fantastic spot to capture the potential of adaptive reuse tenants looking for [that kind of] space.”

While the adjacent Cannon and Quad projects serve different types of occupants, the former’s success gives The Quad proof of concept and bolsters its potential.

“Pagewood was very in tune with the idea of what The Cannon’s site could become in terms of future growth,” said Mark Odom, founding principal of Mark Odom Studio. “The Quad is meant to be an extension or additional opportunity, where they latched on to the idea of the neighborhood [philosophy] … helping to create a neighborhood offering office space with amenities and lifestyle. It has the opportunity to become a destination.”

Pagewood plans to relocate from The Cannon into a portion of The Quad’s first building when the structure is completed this fall. Coonrod said that the success of The Cannon points to a larger shift in the office market that suggests many tenants favor adaptive reuse projects, but the market has yet to respond.

The pandemic, he said, has changed the demand for certain features from office tenants. For example, while surface parking may not have been important 10 years ago, or even been viewed as a detriment, today “tenants want to just arrive, park and walk right into their office quickly. There are a lot more tenants that would prefer to do that than drive downtown, deal with traffic in and out of a parking garage around the corner from the building, and then have to wait five minutes for an elevator in a high-rise.”

The design for The Quad “really started from the exterior,” said Odom, where the team was focused on two major aspects of renovation. First, how would the low-profile, drab buildings draw attention from those driving by on the adjacent expressways? And second, how could they make the industrial park feel like a desirable destination for office tenants?

“You look at these buildings and there's nothing that really draws your eye,” said Odom. “But that's not the fault of the building. It's about the surroundings, how you organize the space around the building in terms of the paint scheme, vegetation and [landscaping].”

Despite their lack of pizzaz, Odom wanted to keep the original A-frame shape of the buildings.

“With an adaptive reuse project, the primary intent is not to lose the character of the building. How do you insert new elements while keeping the soul of the old building? If you change the shape, in this case if we made it a flat roof or built higher, you change the character and the idea of what it once was,” said Odom.

The need to balance preserving the integrity of the building structure, while also drawing attention to the property that would mark it “as an attraction and destination,” was particularly important. This was crucial because the site is located on a major road where commuters are “whizzing by at 60 miles per hour,” said Odom.

The solution: make the building itself an eye-catching graphic.

Working within a conservative budget for the renovation of the first of four buildings, the design team came up with an innovative art technique — wrapping the building in a custom vinyl material graphic, like graphics are applied to cars, with a repeating logo created specifically for the building. It’s the first time Odom’s studio has used the technique, saying it saved on time that a painter would take to create an exterior mural.

Beyond the art, the designers needed to “break up the concrete and grayness all around the site,” Odom said, and make the creative office in an expressway-adjacent industrial park inviting. The team opted to remove some of the parking and build a landscaped, exterior amenity space.

“We put careful thought into how to provide exterior moments so people can get outdoors, walk around and be active and engaged. What are the leftover areas around these buildings that we can really take advantage of? What is that unfound space that we're not using, and how do we turn it into a jewel [or] create an amenity?” Odom said. “Those are some of the key elements that make adaptive reuse projects like this so successful.”

In addition to providing outdoor space for walking meetings or work breaks, the design team also considered “those moments that you walk from your car into the building, and what that pathway looks like,” said Odom. “[Arriving at work] doesn’t just start at the front door.”

That philosophy extends to the entryway of the building, which opens into a restaurant-style coffee bar and lounge space exclusively for tenants, that will also feature a grab-and-go retail component. Drawing on their experience in restaurant design, the team considered furniture, layout and seating arrangements to create a versatile space for all personality types and functions, whether it be an afternoon work break or morning coffee meeting.

“Even though we of course wanted to maximize the leasable square footage of the building, the entry lounge was really important to get right,” said Odom. The lounge takes up about a quarter of the first 10,000-square-foot building, he added.

“We were also being very mindful of the current working lifestyle,” Odom said, adding that the emphasis of the project was not on what people do at their desks, but rather what they need from the common spaces. “The amenities were an essential part of creating intimacy throughout the workday — if you need to get away in order to recharge, find a place to think or have a quiet moment.”

The developers are waiting on signed tenants to customize and build their individual spaces, which start at 2,500 square feet. As construction continues on the remaining three buildings, the tenants will help drive the design based on how they plan to utilize the space.

“It’s kind of interesting that you can allow the different personalities to live in the space for a bit as it gets leased up,” said Odom. “Our team and the developers talk a lot about the next amenity space options, and we love those in-between spaces of the building because those are the ones where people engage as they walk around. So, there are a few different avenues we could [take], depending on the user types.”