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:
- 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.
- 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.
- 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.
- 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.
- 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.