Brownfield Redevelopment: The Benefits for Tenants of CRE

There are an estimated 450,000 vacant commercial buildings and plots of land across the United States.

These idle properties, known as brownfields, are abandoned due to the potential presence of environmental contaminants. Brownfields are often left behind after organizations like manufacturing plants, gas stations, or chemical storage facilities relocate to suburban or rural areas with lower operational costs and taxes. 

To reduce the burden of brownfields on local communities, many state and local governments offer redevelopment programs. By providing buyers or tenants with grants and liability protection, stakeholders are encouraged to engage in the re-development of these underutilized assets. 

Once a brownfield is successfully redeveloped, it will function as any new property or building would. Because of this, redeveloped brownfields offer unique advantages for tenants of commercial real estate.

1. Optimized Location

Few, if any, other properties are available in the vicinity of brownfields, meaning that their location is often optimized. 

Brownfields in centralized locations reduce the financial and environmental costs of additional infrastructure developments. Access to pre-existing infrastructure also leads to more efficient traffic patterns, which, in turn, can attract and retain local labor. 

2. Lower Basis Costs

Due to low acquisition costs of brownfield sites and the grants available for redevelopment, many times the basis in redevelopment opportunities will be lower than other traditional assets. These lower basis costs may reflect the chance for lower occupancy costs for a tenant. 

3. Environmental Advantages

Acquiring or leasing a redeveloped brownfield is typically more environmentally friendly than constructing a new building. In addition to the elimination of contaminants during redevelopment, tenants can also save construction resources. If your organization has environmental, social, and governance (ESG) goals, acquiring or leasing a redeveloped brownfield is likely to align with them.  

Although brownfield redevelopment can be a significant undertaking for developers, newly transformed buildings have great potential for tenants.

Work with a commercial real estate brokerage, like Allegro Real Estate Brokers & Advisors, to decide if acquiring or leasing a redeveloped brownfield is the right choice for your organization. 

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