Marcus Tole
Commercial Property Analyst
Christian Finianos
Commercial Property Researcher
Why considering alternative uses and adaptive reuse strategies may help unlock additional value in today’s market.
Over the past 6 months, we have seen a clear shift in market conditions, with purchasers becoming increasingly selective in how they assess opportunities.
This has largely been driven by broader economic factors, including higher interest rates, increased construction costs and greater scrutiny around feasibility. As a result, certain traditional pathways, particularly development-led outcomes, are in some cases becoming more challenging to execute in the current environment.
In this context, while positioning has always been important, there is now a greater need for property owners to consider how their asset is presented to the market, including whether alternative use outcomes or adaptive reuse strategies may be appropriate, which in certain circumstances may result in stronger value outcomes.
EVERY ASSET IS DIFFERENT, BUT POSITIONING MATTERS
Every property is unique, and factors such as location, existing improvements, planning controls and surrounding infrastructure will ultimately influence its highest and best use.
However, in some cases, assets are assessed and presented based on their most conventional highest and best use interpretation alone. While this is a logical starting point, it may not fully capture how different purchaser groups assess the asset in the current market.
Where there is scope to reposition existing improvements or accommodate alternative uses, the asset may have broader appeal than initially anticipated.
REPOSITIONING AND ADAPTIVE REUSE IN PRACTICE
Adaptive reuse is not a one size fits all solution, nor is it always the appropriate pathway. However, in certain circumstances, it can provide a relatively capital efficient and more immediate means of unlocking value within an existing asset.
Examples of how this may apply include:
- Repositioning office assets toward medical, education or alternative accommodation uses, where appropriate
- Activating industrial improvements for showroom, hybrid or last mile logistics uses, or where appropriate, positioning the asset for future residential redevelopment
- Repurposing retail assets toward service based, health or community focused occupiers
- Leveraging larger landholdings for education providers, religious organisations or lifestyle based uses
In these scenarios, the asset is presented with a broader range of potential use outcomes, which may increase its relevance to a broader pool of target purchaser groups.
LOOKING BEYOND CONVENTIONAL PATHWAYS
In most cases, property owners and purchasers will naturally assess an asset through a highest and best use lens.
However, in certain circumstances, there can be value in looking beyond the most conventional development pathway or use outcome. Exploring alternative positioning strategies, including adaptive reuse or hybrid use scenarios, may introduce additional avenues of demand that would not otherwise be captured across different purchaser groups.
This does not replace a highest and best use assessment. Rather, it complements it by considering how different purchaser groups may interpret and underwrite the asset based on their own requirements and intended use.
To understand where alternative positioning can create value, it is important to first consider how purchasers typically assess an asset.
HOW PURCHASERS TYPICALLY ASSESS AN ASSET
1. Development Potential
Where there is clear development potential, this will typically form a key component of the assessment. However, where development is limited or not immediately viable, the focus generally shifts toward income and usability.
2. Income Profile
For tenanted assets, value is typically assessed based on:
- Existing rental income
- Strength of the tenant covenant
- Lease terms and expiry profile
- Alignment with prevailing market rents
3. Vacant Possession
For vacant assets, purchasers will typically consider:
- What an owner-occupier aligned with the asset’s conventional use would be willing to pay to acquire and occupy the space
- What an investor may pay based on their ability to secure an appropriate tenant
4. Conventional Value Benchmark
In both scenarios, value is often anchored to how the asset performs in line with its conventional use.
5. Where Opportunity Emerges
It is often at this point of assessment where alternative positioning can create additional competitive tension.
THE KEY INSIGHT
The market does not always place a premium on theoretical upside alone. In many cases, it responds more strongly to assets that are clearly understood, practical in their application, and aligned with current purchaser demand.
This is where effective positioning can influence how value is ultimately realised.
POSITIONING AS A STRATEGIC LEVER
Taking an asset to market based solely on a traditional assessment approach may limit engagement to a particular purchaser cohort and anchor value to a single methodology.
By contrast, exploring alternative positioning strategies may allow the asset to be viewed through multiple lenses and presented to a broader pool of target purchaser groups.
This is not about overstating an opportunity or forcing a use that does not fit. It is about ensuring the market is given a well considered view of the asset’s full potential.
OUR APPROACH
At RWC Western Sydney, we take a considered approach to how each asset is positioned, particularly in evolving market conditions.
This involves looking beyond its most apparent use or conventional highest and best use interpretation, exploring both conventional and alternative scenarios, and identifying a broader range of relevant purchaser groups. We also engage directly with targeted purchasers to understand how they are likely to assess and underwrite the asset.
The focus is not simply on marketing the property, but on presenting it in a way that reflects how different purchasers interpret its value, flexibility and potential.
HOW TO MAXIMISE THE POTENTIAL OF YOUR PROPERTY
If you are considering your options, we would welcome the opportunity to provide a tailored appraisal and discuss how your asset could be positioned, including, where appropriate, the exploration of alternative use outcomes and adaptive reuse strategies, to maximise its potential in the current market.
If you are considering your options, we would welcome the opportunity to provide a tailored appraisal.