Development projects take all shapes and sizes in Dallas, but specific projects like office-to-apartment conversions require a particular type of building permit before construction can commence.
“Adaptive reuse” refers to the process of reusing an existing building for a purpose other than the one for which it was originally built or designed. An example could be transforming a historic office building into a multifamily apartment complex. It is a niche development trend makings itself felt in the market.
By altering a structure’s purpose but not its overall design, adaptive reuse developers are able to preserve historic buildings and breathe life into overlooked parts of a city.
Although Dallas could have been well positioned to benefit from the trend, the city was unable to convert any new units in 2022, despite having a little more than 1,900 units in the development pipeline, according to RentCafe’s annual adaptive reuse report.
Information provided to The Dallas Express by RentCafe shows that of the roughly 1,900 units in the pipeline, fewer than 20% are already under construction, with the remaining projects still in the planning stage.
A developer must obtain a building permit before any project can move past the planning phase to actual construction. In the case of adaptive reuse projects, developers must obtain a specific use permit, and the project must meet certain criteria.
With roughly 1,900 units in the development pipeline, Dallas has seen its “projected conversions backlog” grow by 60% since 2021, according to RentCafe, which noted that nearly 850 units “will replace historic office buildings along Elm Street.”
In general, Dallas’ building permit department is no stranger to backlogs.
Following the COVID-19 lockdowns in 2020 and the department’s subsequent transition to an online permit system, Dallas’ Development Service Department (DSD) was overwhelmed by the abrupt change and left unable to quickly address bugs in the software, properly manage incoming permit requests, alleviate approval bottlenecks, or solve its growing backlog.
Under City Manager T.C. Broadnax, permit delays and long approval times remain common occurrences, one for which developers familiar with the process will know to plan and budget ahead.
According to Dallas City Code, a specific use permit “provides a means for developing certain uses in a manner in which the specific use will be compatible with adjacent property and consistent with the character of the neighborhood.”
Special use permit applications must be evaluated by Dallas’ City Plan Commission (CPC) to determine the probable effect of the project on neighboring properties, the community’s welfare, and the development district’s long-term plans.
To address the modification, Dallas City Council must vote to approve a zoning change request for the proposed area.
Due to the cost of adaptive reuse projects, the steps involved in obtaining a special use permit, and the time it takes for Dallas City Council to approve a zoning change request, some developers have opted to work on other projects. In contrast, others focus on less-complicated or expensive projects in different tax increment financing (TIF) districts.
For example, City documents show that Oak Cliff Gateway TIF District considers adaptive reuse projects “a greater demonstration of sustainable best practices and therefore considered a higher priority.”
By contrast, in the Mall Area Redevelopment TIF District, the district admits that adaptive reuse projects are “not a specific priority,” adding that such projects “would certainly be well-received if demonstrated to meet the spirit and intent of the associated area visions and be feasible from both a design and finance perspective.”
While the complexity of acquiring special use permits may help explain why Dallas could not get any adaptive reuse projects off the ground in 2022, Doug Ressler, senior analyst and manager of business intelligence at Yardi Matrix, highlighted other factors that contributed to the inactivity last year.
“Office-to-multifamily conversions target smaller, older properties, yielding limited sector effects,” Ressler said, per RentCafe. “Based on the latest research … the conversion of office spaces into multifamily units will primarily be restricted to smaller, older office properties due to factors such as construction costs and regulations related to residential construction.”