The pandemic disrupted real estate demand, creating ample opportunity for change-of-use redevelopment projects. Now, office spaces are becoming lab space to accommodate life science demand, extended-stay hotels are a starting point for apartment communities and big box retail can be transformed into warehouse and distribution facilities.

While demand has been redistributed, achieving a change of use isn't always easy. David Reina, a partner in Morris, Manning & Martin LLP's hospitality practice, who has seen several hotel-to-multifamily conversions, says that zoning is the top consideration for investors pursuing these deals. "When contemplating a change in use, the first consideration for a buyer is whether it will require a re-zoning or some similar approval from a governmental agency," Reina tells GlobeSt.com. "In a number of urban jurisdictions, existing zoning may allow for hotel or multifamily use, with the change from one to the other requiring no approval or only an abbreviated or of-right application process—that is ideal."

There are also instances when re-zoning approval is required, according to Reina. "Depending on market dynamics and the whether the relevant zoning board or city council has indicated its support of adding housing units, it might still be a good deal," says Reina, advising that investors in this situation would need to engage land-use counsel that has experience and a positive history with the zoning board.