AREA BlogKeeping you up-to-date on Kansas City commercial real estate trends.

From Blighted Big Box to Amazon Distribution Center? Five Reasons Why Retail Space Is Turning to Industrial Usage

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By Brent Peterson – Vice President, Director of Industrial Brokerage

In the past three years, developers have started 24 projects across the United States to convert former retail space into industrial warehousing, according to a recent analysis by CBRE.

The result will be the conversion of 7.9 million square feet of retail space into approximately 10.9 million square feet of new industrial space. The second figure is higher because often a developer will tear down some or all of the existing structures and build a more significant building on that dirt.

The trend of retail to warehouse shows no sign of slowing down, and makes sense for a handful of reasons, here are a few:

  1. More retail sales are happening on the internet. This means that retailers and third-party logistics providers like Amazon, UPS, and FedEx are finding they need more space to facilitate online orders. With that, more brick and mortar store closures are taking place, and as they say, timing is everything.
  2. The industry has opened itself up to the change. These types of conversions have gone from once unthinkable to highly attractive. In Kansas City, we have seen shuttered Big Box stores turn into everything from athletic facilities to distribution centers.
  3. Big Box retail space is far more available than distribution space. While the overall retail market is healthy, several well-known individual retailers have closed hundreds of stores. Those big boxes can be challenging to backfill with new tenants. In contrast, the industrial market, which includes warehouses as well as manufacturing space, is at a historic low.
  4. The location is naturally ideal. Old retail space is often found along major streets or highways, providing easy truck access. While many stores are left because their surrounding neighborhoods deteriorated, those locations are within an ideal distance of large populations for same-day or next-day delivery, which make them perfect last-mile distribution centers.
  5. Structurally, it makes sense.  Standalone Big Box stores and malls can be a great fit for e-commerce distribution because they offer wide-open spaces; dock-high doors for loading and unloading; and reasonable ingress and egress for trucks.

Kansas City will continue to see this trend continue, in large part due to its existing infrastructure. From a logistics standpoint, the metro has a multitude of interstate miles coupled with reasonable traffic patterns for a city of our population size. We can expect to see blighted big box stores put to use in new ways across the city.

If you are interested in learning more or hearing about former big-box real estate options that could work for industrial purposes, I’d love to talk to you about it.

How Retailers Are Using Tech to Increase Brick & Mortar Sales

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By Matt Vaupell – Executive Vice President, Director of Brokerage Services

The evolution of Amazon and its online effect on shopping has made retailers and restaurants scramble to explore options to reinvent how they can do business.

As more and more people are opting to shop online, brick and mortar establishments have to find ways to supplement what they do for their customers and to make the sales experience more streamlined and enjoyable for the end-user. The smart ones are turning to tech to improve efficiency and customer service.

Here are four ways that restaurants and retail are currently utilizing technology to increase their brick and mortar vitality and create a better experience for their customer:

1. Direct to Store Shipping.  Home Depot is doing this as good as anyone in the game. By allowing their customers the convenience of online shopping and product shipping to their store,
they have great convenience partnered with access to their expert staff at pick up which really is the best of both worlds.

2. Mobile Food Delivery. Uber Eats, GrubHub, and Doordash are changing the way we eat, making it easier than ever to enjoy our favorite foods from the comfort of our own homes. The food delivery market is changing at an accelerated pace, and for the moment there seems to be more upside than down to restaurants allowing their customers to order delivery as it helps to expand their customer base and boost an additional stream of revenue.

3. Line Cutting. No one likes to wait in line. No. One. Chipotle has mastered this concept, but several restaurants do this really well. To enhance the customer experience and compete with delivery, many restaurants allow you to order online and pay online, schedule a pick-up time and come grab your order off a shelf with no line or hassle. It is literally grab and go. As it turns out, this might be an even better option for restaurants than delivery, as early 2019 results show upwards of a 10 percent increase in revenue directly attributable to online and pick up component.

4. Mobile Device Tracking. Many of the apps already on your phone enable the location tracking option (ex. weather, maps, and ride-sharing.) Retail-specific apps can allow the customer to sign up for services that can track their location within the stores. For example, within a six-foot radius, retailers like Walmart and Target know when someone is looking at the makeup section but doesn’t end up purchasing something. They can then do location-targeted advertising to that mobile device, based on the needs and wants of the consumer, ultimately allowing retailers to remind customers what they might need based on their behavior patterns.

The whole idea that brick and mortar retail will become obsolete doesn’t have to become a self-fulfilling prophecy. The way restaurants and retailers can survive is by utilizing technology to streamline efficiencies and bolster the in-store and online customer engagement and service.  The key is to make it so the consumer needs or wants to stop by as opposed to just delivering to their doorstep and technology can help achieve that.

Lightwell KC – Video 1

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Here’s a preview of how a few of KC’s heavy hitters- HOKJE Dunn Construction, and AREA Real Estate Advisors are joining forces with Somera Road to turn former City Center Square into Lightwell, THE destination for Class A Office Space in the greater Kansas City metro!

This is the first video of a 4-part series that Let it Fly Media is producing, giving you an inside look into the story behind the renovations that will be changing the office scene downtown. Stay tuned as we release the rest of the videos from the series.

To download the video, click here.

For Lightwell marketing materials, click here, or visit their web site, www.lightwellkc.com.

Trend Alert: Apartment Living Isn’t Just for Millennials. Their Parents are Moving In.

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By Grant Kollman – Vice President, Director of Multi-Family

If one thing has become increasingly clear to me in recent months, it’s that millennials and baby boomers have quite a few things in common.

Both generational sets are renting apartments in higher numbers and for longer duration than ever before. Whether starting a career or empty nesting, both are seeking a lifestyle that offers convenience, and community in Kansas City and across the country.

In fact, a recent cnbc.com article supports this saying that from 2009 to 2015, the number of renters 55 and up increased by 28 percent, while those 34 or younger only increased 3 percent. The same report said that more than 5 million baby boomers across the nation are expected to rent their next home by 2020.

So while renting was previously considered to be a stepping stone to home-ownership; in terms of investment, commercial property owners should be prepared to answer the needs of America’s two largest generations. What are those needs? Amenities, including cost savings, flexibility, location, and maintenance-free living.

For Millennials in the process of building their careers, the ability to relocate is a significant factor. We are seeing that if they are in a financial position to purchase a home, they may rent to have more flexibility to take advantage of new job opportunities or transplant themselves to experience a different city.

Likewise, empty nesters are ready to give up home maintenance tasks, including yard work and repair, so renting can be an appealing solution. If something goes wrong, all they have to do is pick up the phone, and the property manager will take care of it. Young professionals who don’t have the time or desire to address these issues are also looking to have a landlord to handle their leaky pipes or broken fridge.

Shared amenities are also high on the list of things both millennials, and boomers are looking for. From movie theaters to gyms, it seems both groups are enticed by more than the square footage of their potential apartments.

In Kansas City and beyond, this trend shows no sign of slowing down. These two broad groups will continue to value the wants and needs that that will allow them the mobility and flexibility to keep moving.