REVIVING RETAIL: SHOPOFF'S VISION FOR CONVERTING DISTRESSED SPACES INTO THRIVING RESIDENTIAL HUBS
Published on Thursday, April 25, 2024
GlobeSt.com recently caught up with Bill Shopoff, the founder and CEO of Shopoff Realty Investments based in Irvine, CA, about his approach to tackling the housing shortage through the redevelopment of retail properties.
IRVINE, CA—The real estate investment landscape is undergoing significant evolution, marked by the emergence of innovative solutions. One such solution involves the revitalization of distressed retail spaces into mixed-use residential properties—a tale that seamlessly merges two major real estate asset classes while promising appealing investment returns. Not only does this approach tackle the housing shortage, but it also breathes new life into vacant or underutilized retail properties. We recently caught up with Bill Shopoff, founder and CEO of Irvine, CA-based Shopoff Realty Investments, for a Q&A on the subject. Shopoff has three projects converting retail into housing and mixed use underway and a fourth planned project, all in the highly competitive California market.
GlobeSt.com: Can you tell me what inspired you to venture into redeveloping distressed retail spaces into mixed-use residential properties and maybe a bit about the projects in particular or what stands out about them?
Bill Shopoff: Much of our development takes place in coastal California, where most of the land has already been developed. We need to look toward redevelopment opportunities. Retail sites provide an interesting option given that they usually have sufficient scale, utilities in place and good access from adjacent roads. Additionally, the impacts of building residential are generally less than the existing retail condition and hence make getting approvals more straightforward.
GlobeSt.com: How do you see this trend of repurposing retail spaces contributing to addressing the housing shortage not only in California but nationally?
Shopoff: I think you will see this in multiple locations around the country, but generally, it will be restricted to higher value markets where land is at a premium. We do see opportunities in other markets and expect to explore these further.
GlobeSt.com: Could you share some insights into the challenges and opportunities you've encountered while implementing these conversion projects?
Shopoff: The biggest impediments to repurposing retail have to do with dealing with the existing tenancies. These include any CCRs that might exist and reciprocal access agreements that require negotiation with major tenants. This requires a significant level of diligence prior to an acquisition as well as providing for proper budgeting to handle these issues.
GlobeSt.com: What factors do you consider when selecting retail properties for redevelopment into mixed-use spaces?
Shopoff: It is pretty similar to any other acquisition in that we are focused on quality locations, reasonable pricing, and willingness for the local community to support our plan. We meet with elected officials and city government during the diligence phase of acquisitions. This is essential to garnering support from the community for our proposed project.
GlobeSt.com: How do you navigate the regulatory landscape and community engagement aspect of transforming retail spaces into residential areas?
Shopoff: There are a number of issues that we must take under consideration, including several new laws available to us in California. Some of these may be helpful, but they all come with their own constraints which we must navigate. This might include affordable housing, or requiring the use of union labor. We will consider all options while designing a project and determine the best course of action.
GlobeSt.com: How do you envision the future of the real estate investment landscape evolving, particularly with regards to the convergence of retail and residential sectors?
Shopoff: Adding residential to these less than successful retail projects has the potential to not only make successful residential, but also to improve the retail environment. Retail that surrounds new residential will do better given the built-in customers (from the residential), and further, other retail in the community can also improve given the removal of sub-quality competition.
GlobeSt.com: Can you tell me what inspired you to venture into redeveloping distressed retail spaces into mixed-use residential properties and maybe a bit about the projects in particular or what stands out about them?
Bill Shopoff: Much of our development takes place in coastal California, where most of the land has already been developed. We need to look toward redevelopment opportunities. Retail sites provide an interesting option given that they usually have sufficient scale, utilities in place and good access from adjacent roads. Additionally, the impacts of building residential are generally less than the existing retail condition and hence make getting approvals more straightforward.
GlobeSt.com: How do you see this trend of repurposing retail spaces contributing to addressing the housing shortage not only in California but nationally?
Shopoff: I think you will see this in multiple locations around the country, but generally, it will be restricted to higher value markets where land is at a premium. We do see opportunities in other markets and expect to explore these further.
GlobeSt.com: Could you share some insights into the challenges and opportunities you've encountered while implementing these conversion projects?
Shopoff: The biggest impediments to repurposing retail have to do with dealing with the existing tenancies. These include any CCRs that might exist and reciprocal access agreements that require negotiation with major tenants. This requires a significant level of diligence prior to an acquisition as well as providing for proper budgeting to handle these issues.
GlobeSt.com: What factors do you consider when selecting retail properties for redevelopment into mixed-use spaces?
Shopoff: It is pretty similar to any other acquisition in that we are focused on quality locations, reasonable pricing, and willingness for the local community to support our plan. We meet with elected officials and city government during the diligence phase of acquisitions. This is essential to garnering support from the community for our proposed project.
GlobeSt.com: How do you navigate the regulatory landscape and community engagement aspect of transforming retail spaces into residential areas?
Shopoff: There are a number of issues that we must take under consideration, including several new laws available to us in California. Some of these may be helpful, but they all come with their own constraints which we must navigate. This might include affordable housing, or requiring the use of union labor. We will consider all options while designing a project and determine the best course of action.
GlobeSt.com: How do you envision the future of the real estate investment landscape evolving, particularly with regards to the convergence of retail and residential sectors?
Shopoff: Adding residential to these less than successful retail projects has the potential to not only make successful residential, but also to improve the retail environment. Retail that surrounds new residential will do better given the built-in customers (from the residential), and further, other retail in the community can also improve given the removal of sub-quality competition.