Recently, I’ve been mulling the idea of buying an industrial building and cutting it up into affordable artist studios.
I have observed that these kinds of deals can work pretty well if you get the property very cheaply and keep your renovation costs low. You obviously also have to be in an interesting area… but we obviously know a few of those.
Why do I like the strategy? Artists tend to pioneer interesting areas because they look for very cheap space to work. The kind of people who hang out with artists (often, creative types who work in more traditional jobs) end up being drawn in and pretty soon small design / tech shops start to get interested, too.
The problem with this kind of deal is that the numbers are very unlikely to look good up-front. Yes, you can probably find a good building pretty cheap. But the rents are going to be low to begin, so the yield is not going to be very good.
So, why do this kind of deal? Well, one reason is that I like art because I grew up around it… check out this picture my dad, Larry Kagan, just sent me of his latest piece (yes, that plane is comprised entirely of shadows cast by the wire “clouds” above it… pretty sweet, huh?):
But there’s also the opportunity for increased rents and, therefore, yield if you get the branding and tenant mix right.
I can’t do this kind of deal with the funds we’ve raised; they’re for apartment. But if anyone out there is interested in kicking in some money alongside us on this kind of project, reach out. Maybe we can find a way to do it together.