Detroit Free Press: New wave of old Detroit office buildings eyed for adaptive reuse

New wave of old Detroit office buildings eyed for adaptive reuse

Downtown Detroit has been a showcase for adaptive reuses of old buildings since well before COVID-19 and the nationwide falloff in office demand made a hot trend of turning office buildings into hotels and apartments.

Now a new wave of such projects is being considered, including for some historic high-rises that have lacked office tenants for decades and been sitting mostly vacant.

The various proposals show how developers continue to see a bright future for downtown housing and hotels, even as sizable new projects that broke ground before or early in the pandemic are starting to open, such as Dan Gilbert’s Book Tower rehab and the new 16-story Greektown condo and apartment building known as The Exchange.

“There’s still real demand for multifamily and hotels in the city,” said AJ Weiner, a managing director in Detroit for real estate firm JLL. “It hasn’t really wavered before or through or after COVID, whereas office space demand is clearly way off.”

This week, the Detroit Historic District Commission gave its approval to plans for adaptive reuses of two 1920s office buildings:

  • The 11-story Harvard Square Centre, 1346 Broadway St., to become 34 apartments as a Bedrock project.
  • The nearby nine-story Merchants Building, 206 E. Grand River, to become a 100-plus room hotel as a project by Detroit-based Method Development.

Back in March, the commission signed off on a similar project:

Conversion of an empty seven-story office building at 1133 Griswold, near downtown’s Capitol Park, through a plan that calls for adding four new floors to the top of the building and creating apartments. The proposal is by Richard Karp of Karp & Associates.

And last month Crain’s Detroit reported that Gilbert’s Bedrock firm is also considering another possible adaptive reuse:

A full or partial conversion into apartments of the Buhl Building, 535 Griswold St., which currently has office tenants.

Yet another conversion plan is part of the $1.5 billion District Detroit development by the Ilitch organization’s Olympia Development of Michigan and New York developer Stephen Ross:

Redevelopment of the 10-story Fox Theatre office building, 2211 Woodward, to become the 177-room Fox Hotel. This project, which wouldn’t alter the Fox Theatre itself, is to start in the second quarter of 2026 and take two years to complete.

Office-to-housing conversions have been a hot topic in real estate development across the country since the pandemic upended expectations for in-person office work, resulting in less office space demand in some cities as leases come up for renewal.

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A key difference between the conversion projects under consideration in Detroit and those in cities such as San Francisco, where one-third of offices are now reportedly vacant, is that most of the Detroit projects target old office buildings that were empty or mostly empty long before the pandemic.

Older office buildings can be more amenable to conversions because they typically have narrower floorplates, which allows each future apartment or hotel room to have windows. More modern office buildings tend to have wide floors.

“If it’s too big of a floorplate, it might not lay out nicely for residential. So it all depends on the type of building,” said Rocky Lala, principal and cofounder of Method Development, which is planning to convert the Merchants Building into a hotel.

Some of the downtown buildings being eyed for conversions have been empty of office tenants for so long that they aren’t counted in the office space vacancy rate, which was just over 16% in the central business district in the first quarter, according to real estate firm Newmark. The rate was under 13% in fall 2019.

Steve Morris, managing partner of Farmington Hills real estate firm Axis Advisors, said some office tenants have been leaving older “Class B” and “Class C” office buildings for newer or more newly renovated — and more expensive — “Class A” buildings. Yet tenants are still saving money in these moves, he said, because they are downsizing their leased space by one third to a half.

The ornate 27-story Buhl Building, which dates to 1925, could be one such candidate. Bedrock bought the tower and an adjoining parking garage in 2017.

“The Buhl Building is a unique layout that really wasn’t conducive to office post-1955 or 1960,” said Weiner of JLL. “Corporate tenants really couldn’t figure out how to make all these jagged edges work. So it’s a natural for a Buhl Building, because of the architecture, to go residential.”

A Bedrock representative did not respond to a request for comment for this article.

Bedrock’s conversions of the old Detroit Free Press Building, 321 W. Lafayette, and the Book Building and Book Tower, 1265 Washington Blvd., show how old and functionally obsolete office buildings can be redeveloped into luxury housing — and fetch top-dollar apartment rents.

“If you’re able to go from B office rents to Class A multifamily rents, you have to spend money to get there. But over the long haul you’re going to have a more valuable asset,” Weiner said.

Even Detroit’s functional office buildings are still not as bustling as they were before the pandemic, back when employers wanted office workers in their seats five days a week.

This April, the average number of daily downtown workers was about 34,300, or barely over half the 66,600 average in February 2020 on the eve of the pandemic, according to the Downtown Detroit Partnership.

Harvard Square conversion

The Harvard Square Centre building opened in 1926 and was designed by the Detroit architectural firm George D. Mason & Company.

The building was known early on as the American Radiator Building when it was home to the American Radiator Co. It became the Phillips Building in the 1950s and acquired its current name in the mid-1970s. The building has been mostly vacant since the late 1990s, although it did host the Paris Bar on the first floor until 2015.

A Bedrock-linked corporation purchased the building in November 2017 for $6.25 million from Detroit landlord Dennis Kefallinos, lands records show. Bedrock is now looking to redevelop the building and put in 34 apartments and lower-level space for food and beverage retail, according to architectural firm documents and a development report issued last fall by the Detroit Downtown Partnership.

Merchants Building

The nine-story Merchants Building dates to 1921 and is on the National Register of Historic Places. The upper floors have been vacant in recent years while the ground floor has hosted a juicery, doughnut shop and Jose’s Tacos.

Detroit-based Method Development bought the building for $5.9 million in May 2022, land records show. The firm has undertaken historic rehabs in the city’s Milwaukee Junction, Brush Park and Corktown neighborhoods.

The firm’s principals and cofounders, Lala and Amelia Patt Zamir, said in a recent interview that they hope to make an announcement in the future regarding the timeline for the rehab and the brand of hotel that would go into the Merchants Building.

“We are committed to delivering an inclusive and best-in-class hospitality experience,” Patt Zamir said. “Our company is mission driven, and our mission is to adaptively reuse historic buildings that are obsolete.”

1133 Griswold

This seven-story building opened in the early 1920s and was designed by the prolific Albert Kahn. It originally housed the United Savings Bank of Detroit. In 1971, when the Detroit & Northern Savings and Loan Association bought the building, the early limestone cladding was removed and a pink granite exterior was installed that blocked out nearly all sunlight, according to city documents.

Karp & Associates plans to redevelop the building and add four new floors for a total of 11 floors, according to architectural firm documents. The first two floors would house commercial tenants and the upper floors would have apartments.

Karp & Associates could not be reached for comment about the plans.

Past big conversions

Some of the notable office-to-housing and office-to-hotel conversions in downtown Detroit include:

  • Book Building and Book Tower, 229 apartments and 117 hotel rooms, reopening soon.
  • Walker-Roehrig Building, 154 hotel rooms, newly open.
  • Detroit Free Press Building, 105 apartments, reopened in 2020.
  • David Stott Building, 107 apartments, reopened in 2018.
  • David Whitney Building, 80 apartments and 160 hotel rooms, reopened in 2014, renovations announced again in 2022.
  • Broderick Tower,125 apartments, reopened in 2012.
  • Gabriel Richard Building, 125 extended-stay hotel rooms, reopened in 2019.

Source: Detroit Free Press