Philadelphia is a leader in turning old factories and offices into apartments
The city has been a leader in adaptive reuse since the 1980s. Next year's change to the property tax abatement could be a powerful incentive for more developers to reimagine old buildings.
For more than a century, the massive brick building at the corner of 31st and Jefferson Streets housed a brewery, then storage, small businesses, and briefly, another brewery. More recently, it sat as a vacant, graffitied relic for 16 years. This spring, it will take on new life as apartments and retail space.
The former home of F.A. Poth Brewing Co. is part of the fabric of Brewerytown, “and it would be a sin for that building to be torn down,” said David Waxman, cofounder and managing partner of Philadelphia-based MMPartners, which is developing the site.
Construction is underway to outfit the new Poth Brewery with 132 apartments and 25,000 square feet of retail space. Because the structure wasn’t built for apartments, many of the units are uniquely shaped and sized with 36 different layouts. Openings in the masonry will become windows, exposed steel beams will be focal points in new light wells, and existing graffiti will be sealed on apartment walls.
“Everyone assumed this building was shot,” said Aaron Smith, cofounder and partner. “The fact this building can live another 50, 60 years — nothing could make us happier.”
Developers in Philadelphia have created more than 1,800 apartments in 10 repurposed or soon-to-be repurposed older buildings in the last couple of years, more units than in any other U.S. city, according to an analysis published last month by RentCafe, a national apartment search website. Philadelphia has been a leader in adaptive reuse since the 1980s. The city is peppered with converted factories, warehouses, offices, churches, and schools.
Philadelphia’s rank is no surprise, said developer Carl Dranoff, who helped spark the city’s adaptive reuse boom as cofounder of Historic Landmarks for Living, the largest rehabilitator of historic buildings in the country when it converted buildings such as the Chocolate Works and Bridgeview Place in Old City in the 1980s.
“We’re the oldest big city, and we have the most historic buildings just by our sheer size and longevity,” Dranoff said.
In other words, said Paul Steinke, executive director of the Preservation Alliance for Greater Philadelphia, “we’d better be high on this list.”
Given Philadelphia’s past as a manufacturing hub and the dwindling need in recent decades for the hulking buildings that proliferated for this purpose, the city has had a large inventory of factories waiting for reuse.
These are “unused, blighted buildings that are often major challenges,” said Paul Levy, president of the Center City District, which manages and cares for the downtown area.
From the 1950s through the 2010s, Philadelphia added about 11,200 apartments in converted buildings, according to RentCafe.
Incentives and community rewards for adaptive reuse
“Philadelphia has long lacked any kind of real municipal incentive for historic preservation and adaptive reuse,” Steinke said. “But we’re about to get one back.”
On Jan. 1, the city’s property tax abatement for new residential construction drops from 10 years to what amounts to five years. But the tax break for rehabilitated properties will continue at full strength, creating the city’s first real financial incentive for adaptive reuse since the tax abatement was expanded from only rehabilitation in the late 1990s to all construction in 2000, Steinke said.
“We think that could be a pretty big deal,” he said.
Thanks to City Council legislation signed into law in 2019, developers who redevelop buildings that are historically designated are released from parking requirements, and certain historic conversions qualify for more flexible zoning.
“To some degree, Philadelphia has failed to act as the historic city it is in terms of setting goals for redevelopment and rehabilitation,” Steinke said. But he sees the city turning a corner with the new city laws.
Federal historic tax credits encourage developers to take on historically designated buildings by cushioning them from some of the risk associated with old structures that can harbor costly structural and environmental surprises.
“I think we have neighborhoods here where the buildings would have been razed but for the historic tax credits,” Dranoff said.
Over the last couple of years, the cost of construction has spiked as supply chains have been disrupted and material prices have risen. Renovating a building that lends itself to conversion can take less money and time than new construction because the building’s infrastructure already exists and contractors use fewer materials.
Repurposed buildings can have less environmental impact than new construction. The built-in history and character of old buildings make them appealing to many developers and potential tenants. Because vacant and blighted buildings pull down a community’s property values and invite crime, the rehabilitation of abandoned buildings can spark neighborhood and economic rejuvenation.
Old City’s long-ago reimagining of its industrial history into a more residential neighborhood sparked a full-time vibrancy that has been on display over the last two years, said Job Itzkowitz, executive director of Old City District.
“Having that residential density has been tremendously important for Old City throughout the pandemic,” he said. “Thank God we had that conversion happen already.”
With the future of office space uncertain as more employees work remotely, the pandemic could spur more conversions of offices to residential uses. According to RentCafe’s analysis, 41% of the country’s converted apartments over the last two years are in former office buildings.
Examples of residential reuses
Residential adaptive reuse projects across the city range in size and scope.
Civetta Property Group turned a historic building that once housed an acting school and theater in Old City into its office on the first floor with apartments on top. The developer’s portfolio of single-family and multifamily homes is a mix of new construction and rehabilitation.
While in the market for smaller multi-unit opportunities, the company converted a textile factory at 1737 N. Howard St. in North Philadelphia into a seven-unit apartment building in 2016, said cofounder Brennan Tomasetti.
“If we can restore and preserve something that is in relatively good shape and able to be saved, we enjoy doing that, and we prefer to do that,” she said.
MMPartners adapted the former St. Joseph’s Hospital at 16th Street and Girard Avenue in North Philadelphia into the Civic — nearly 90 apartments and commercial space — in 2019.
Developer Tony Rufo brought 151 apartments to a long-vacant South Philadelphia paintbrush factory at 12th and Jackson Streets that opened as the Brush Factory Lofts in 2019.
Post Bros. converted a former century-old Strawbridge & Clothier warehouse in North Philadelphia into the Poplar apartments, which opened to residents this year.
Frank DiCicco, chair of the city’s Zoning Board of Adjustment, said the number of recent building conversions is “pretty amazing.”
“It seems like they’re filling up,” DiCicco said. “They’re not just being built and sitting there. There’s a demand.”
Residential buildings with retail on the ground floor remain popular projects that help revitalize communities, said Marc Collazzo, executive director of the Fishtown Kensington Area Business Improvement District.
“What’s happened is, instead of having these older dilapidated properties, people are coming in to really fill a need and fill a want,” he said. Especially with old large and solid brick buildings, he said, “they’re aesthetically pleasing and they’re sound, so let’s do something good with them.”
The business improvement district is trying to acquire a vacant, fire-damaged building at the corner of East Girard Avenue and East Columbia Avenue once owned by a nonprofit. The organization plans to bring in a business on the ground floor and affordable housing above. A court hearing is scheduled for Nov. 15.
Although the city is a leader in adaptive reuse, “Philadelphia continues to lose a lot of buildings that could easily be saved,” Waxman said.
“To a lot of developers, they see nothing but risk and don’t want to take it on,” he said.
Evaluating the strength of a building’s foundation and supports, remediating asbestos and any other environmental hazards, and adapting a building for residents can be costly. Sometimes, windows are too small, ceilings are too low, and beams are in the wrong places. Not every old building is a good candidate for residential reuse.
The redevelopment of properties for new use sometimes comes up against opposition from neighbors and legal battles. Plans to turn St. Laurentius Church in Fishtown into apartments, for example, failed, and the church is slated to be demolished to make way for new construction.
MMPartners acquired the Poth Brewery building in January 2018 but faced a drawn-out process to get a zoning permit because of a list of building violations racked up by a previous owner, Waxman said.
Despite challenges, over the last couple of decades, the city has built up and attracted “a very robust industry” of developers and architects with expertise in building conversions, Levy of the Center City District said.
“Hopefully this will keep going until we remove all the blight from Philadelphia,” said Ken Weinstein, president of Philly Office Retail, a development company based in Northwest Philadelphia focused on adaptive reuse and preservation of historic buildings. “It takes hundreds of developers to do that, so everyone’s got to get on board.”