Over the course of 18 months, Tom Poupard was confronted with something he had never seen before as head of his small town’s development office: Three separate proposals to convert three old office buildings into self-storage facilities.

As it was, two of the developers later backed out of tentative plans to convert underused office buildings into storage. But the third proposal – transforming the site of an old 30,000-square-foot office building into more than 900 storage units at 990 Skokie Boulevard in Northbrook, IL – is proceeding as planned.

The proposed developer, The Lock Up, is currently seeking necessary building permits. The company bought the site in November for $3.8 million, property records show. The award-winning office building will be demolished to make way for a ground up storage building.

This vacant office building in the Chicago suburb of Northbrook will be replaced with a new self-storage facility.
This vacant office building in the Chicago suburb of Northbrook will be replaced with a new self-storage facility.

Reinventing obsolete spaces

The lesson Poupard, director of development and planning services in Northbrook learned: The suburban commercial real estate market sure is changing.

“It points to a bigger issue of what you do with tired, old office spaces,” said Poupard. “People are looking for new uses for these sites.”

Indeed, in a recent white paper, researchers at Newmark Grubb Knight Frank (NGKF) recently concluded that there’s now about 500 million to 1 billion square feet of what is described as “obsolete suburban office space” across the nation, usually older Class B facilities that are having a hard time leasing out space to tenants.

Outdated and out of touch

“There are some office spaces that just won’t go for any price,” said Greg Leisch, head of research at NGKF, “As a result, office property owners need to find new uses.”

The buildings may be old, in poor locations and just structurally not up to par when it comes to handling sophisticated new technologies, from high-end air-conditioning systems to the wiring for computer and telecommunications networks. Such suburban buildings are also the partial victim of the nationwide trend of young workers increasingly wanting to “live, work and play” in more urban environments with easy access to public transit and urban amenities such as restaurants and stores.

No matter what the reasons, huge swaths of the suburban office market – much of it within large and small office parks built in the 1960s through the 1980s — are not being fully utilized as originally planned and built, NGKF has concluded.

Redevelopment options

To date, the most popular alternatives have been to convert obsolete office buildings into hotels or multifamily apartment facilities, said Leisch. And it’s not just happening in the suburbs. Cities such as Baltimore and Philadelphia are now aggressively pushing conversions of old office buildings into residential units or hotels, said Leisch.

Then there’s the storage option.

Leisch said he’s anecdotally hearing more about developers transforming offices to storage, or at least exploring the concept, though there are no hard figures to quantify how often and how many office buildings are being converted.

“I’m not prepared to call a trend – not yet,” said Leisch. “But it is happening.”

Exploring the niche

In fact, it’s happening in places like the Chicago-area and other densely populated metro areas with higher incomes and plenty of renters in need of storage. Other recent examples include sites in Rockville, MD and Richmond, VA.

LifeStorage LLC, which owns or operates about 90 storage facilities in nine states across the country, has converted about 10 office buildings into storage facilities over the past 36 months. Nine of those have occurred in the Chicago area and one occurred in the Dallas-Fort Worth area.

LifeStorage recently converted this former office building in Napierville, IL into an 845-unit storage facility.
LifeStorage recently converted this former office building in Napierville, IL into an 845-unit storage facility.

Among the buildings recently converted by LifeStorage include 102,700 square feet at 1455 Barrington Road in Barrington, IL, now with 689 storage units (plus some offices); and 107,000 square feet at 1950 N. Washington Street in Naperville, IL, now 845 storage units (plus some offices). LifeStorage was also the original pursuer of the Northbrook project now in the hands of The Lock Up.

The common denominator for each of those former office buildings: They weren’t financially performing as offices and yet each was in an area with a large number of higher-income renters in need of storage space, said Ben Carr, chief investment officer for LifeStorage LLC, based Roseville, CA.

A complicated task

An office-to-storage conversion is not a simple undertaking, said Carr. Each building has to be carefully researched before proceeding.

“When you’re kicking the tires of a building, you have to make sure it’s structurally right,” said Carr.

The three main questions LifeStorage asks are: 1.) Why did an office building fail in the first place and are the economic dynamics different for storage? 2.) Is the site properly zoned for storage? 3.) Is the building structurally sound?

Finishing touches

As for the physical condition of an office building, developers have to look at a number of things before undertaking a conversion – such as whether a building has adequate load-bearing walls, high ceilings and room for cargo elevators.

A post-conversion LifeStorage facility at 1455 Barrington Road in Barrington, IL.
A post-conversion LifeStorage facility at 1455 Barrington Road in Barrington, IL.

For many customers, Carr said it’s also key that a facility, after it’s been converted, appears clean and looks like it can safely and securely handle large amounts of stored items.

“Slapping a sign on an office building and calling it ‘storage’ is just not enough,” said Carr.

Hybrid approach

Sometimes, conversions start and end differently.

Just outside Boston, there’s been a number of old mixed-use buildings converted to storage. Mike Oniskey, owner of three Storage Bunker facilities in the Boston area, said his company recently purchased and converted two buildings.

One of them at 25 Commercial Street in Medford, a densely populated blue-collar city just north of Boston and home to Tufts University, used to be a combination office building (4,000 square feet) and chemical warehouse (22,000 square feet). All of the warehouse space was converted to storage and half of the former offices were turned into storage as well.

This former chemical warehouse and office building was perfect for Storage Bunker's hybrid facility in Medford, MA.
This former chemical warehouse and office building was perfect for Storage Bunker’s hybrid facility in Medford, MA.

Oniskey said he opted to keep 2,000 square feet of the former office space to rent out to tenants who needed both a place to work and to store items. The result: A hybrid office-storage facility.

Roughly the same thing happened at 20 Sycamore Avenue, also in Medford, when Oniskey purchased an old 40,000 square foot building previously used as offices (10,000 square feet) and auto-parts supply warehouse (30,000 square feet). In the end, Oniskey converted only 2,500 square feet of the offices to storage, renting the rest of the space out to tenants who needed both offices and storage.

Conversion savings

Oniskey thinks even more office buildings, or mixed-used buildings with office components, will be converted into storage in coming years. “It’s less expensive than building from scratch,” he said of conversions to storage.

Michael Cappelletti’s Cubiq, a Boston “boutique” storage company that picks ups and delivers storage items for mostly apartment-renting customers, currently leases storage space from Oniskey in Medford. He also expects to see more office and mixed-use buildings converted into storage, especially spaces near public-transit stations where apartment renters like to live.

“It’s going to be a trend,” Cappelletti said. “Building new storage facilities is getting harder and too expensive. Conversions make sense.”

Jay Fitzgerald