What Is Special Purpose Property?

In the world of real estate, there are several types of properties, including residential, industrial, commercial, and more. One such category is known as special purpose property. A special purpose property features a unique physical design, specialized construction materials, and/or a layout that limits its functionality to the specific use for which it was originally built.

In this blog, we’ll explain what a special purpose property is, what makes it different, how it’s used, and how you can buy one without any trouble.

What Is a Special Purpose Property?

A special purpose property is a type of real estate that’s built for one specific use. These properties have a special design, layout, or construction that makes them hard to use for anything else without major changes.

Common examples of special purpose properties include churches, schools, gas stations, movie theaters, and warehouses. Because they are made for one purpose, they don’t easily fit into general categories like residential, commercial, or industrial properties.

Key Characteristics of Special Purpose Properties

Here are some key features that make these properties different from regular residential or commercial real estate:

Unique Design and Construction

These properties often have a very specific layout or structure that fits one type of business or activity. For example, a movie theater has sloped floors and soundproof walls that aren’t useful for most other businesses.

Limited Use

A special purpose property is usually not easy to turn into something else. You can’t just turn a church into an office or a car wash into a restaurant without major remodeling.

Special Zoning Requirements

Most of these properties are subject to strict zoning and compliance laws, meaning they can only operate in specific areas approved for their type of use.

Harder to Value

Since there aren’t many properties like them, it can be tough to figure out their market value. Appraisers often use different methods to calculate the value of special use real estate.

Special Materials or Equipment

Some of these properties use custom materials or built-in equipment that’s designed only for their original purpose, like industrial kitchens in event halls or pumps in gas stations.

Examples of Special Purpose Properties

Special purpose properties come in many forms across different industries. Common examples include:

• Educational Institutions: Schools, colleges, training centers

• Healthcare Facilities: Hospitals, diagnostic centers, nursing homes

• Religious Buildings: Churches, mosques, temples, synagogues

• Entertainment Venues: Cinemas, theaters, concert halls

• Automobile Services: Car washes, gas stations, auto repair shops

• Public Infrastructure: Airports, train stations, police stations

• Industrial Sites: Manufacturing plants, distribution centers, refineries

Each of these has a special layout, equipment, and purpose, making them difficult to repurpose for unrelated uses.

What Are the Different Classes of Special Purpose Real Estate?

Special purpose properties can be classified into different groups based on ownership and usage:

Public-Use Special Purpose Properties

These are government or municipality-owned properties, such as:

• Public schools

• Police stations

• Government-operated hospitals

• Libraries

They are used to serve the public and often operate under strict legal and budgetary constraints.

Private-Use Special Purpose Properties

Owned by private entities, these include:

• Private hospitals and clinics

• Private manufacturing units

• Corporate training facilities

• Religious buildings owned by institutions

These are still specialized but serve commercial or organizational needs.

Recreational or Cultural Special Purpose Properties

This class includes:

• Theaters and performing arts centers

• Museums and exhibition halls

• Stadiums and sports complexes

These require a specific design for audience engagement, safety, and performance needs.

How to Buy Special-Purpose Property

Buying a special-purpose property takes a bit more planning than buying a typical home or commercial space. Since these buildings are designed for one specific use, you’ll want to make sure they fit your exact needs from the start.

It’s a good idea to work with a real estate agent who has experience in this type of property, as they’ll understand the unique challenges involved. Always check the zoning laws to ensure the property can legally be used the way you intend, especially if you're planning any changes.

Conclusion

Special purpose properties may not be the most flexible type of real estate, but they are vital for many industries and services. Whether you're looking to develop, invest in, or manage a special use building, understanding the unique challenges and opportunities is key. At Arbor Realty, we help clients navigate the complexities of special purpose properties and offer expert support from land acquisition to design, construction, and legal compliance.

Need help getting started? Contact us today for expert support and advice.

Frequently Asked Questions

Q: Can a special purpose property be converted for other uses?

A: Yes, but it’s rarely simple. Repurposing these properties requires major renovations, zoning changes, and sometimes even structural changes to meet the needs of the new function.

Q: Are special purpose properties good investments?

A: They can be—but only if you're in a business that requires that specific function. They generally don’t appeal to a broad range of buyers, so liquidity and resale value can be limited.

Q: How is the value of a special purpose property determined?

A: Most appraisers use the cost approach, which calculates value based on the cost to replace the property, minus depreciation. Traditional market comparables are hard to find because these properties are so unique.

Q: Do I need special permits or approvals to operate a special purpose property?

A: In most cases, yes. You’ll likely need specific zoning approval, building permits, and sometimes environmental or health clearances depending on the type of property.