Owners of retail properties have been pretty creative in recent years, repurposing vacant spaces to turn them into anything from restaurants and entertainment areas to apartments, co-working offices, schools and hotels.
Now millions of square feet of empty storefronts – especially those that used to be home to freestanding big-box stores – are being transformed into industrial space to serve e-commerce needs.
“Major retailers expanding their omnichannel platforms are transforming underperforming retail properties to e-commerce-driven logistics space,” CBRE said in a recent report.
The commercial real estate services and investment firm identified 24 retail-to-industrial projects begun since 2016 that are turning 7.9 million square feet of one-time retail space into 10.9 million square feet of new industrial space.
This change is taking place either by converting the existing retail structure or replacing it with new on-site industrial construction.
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Many of the conversions are in secondary markets such as Detroit, Memphis, Toledo, Salt Lake City, Cincinnati, Cleveland, Milwaukee, and Columbus, OH. One example is an Amazon fulfillment center under construction on the site of an abandoned mall in suburban Cleveland that is expected to open this spring. And that’s after Amazon already had taken over another closed mall in the Cleveland suburbs.
Ideal candidates for these conversions, the report found, are freestanding big-box stores closer to population centers than warehouse districts.
That could be good news for shopping center owners faced with empty space from the thousands of big-box stores shuttered in recent years by retailers such as Toys ‘R’ Us, Sears, Macy’s, J.C. Penney, Bon-Ton, Sam’s Club, Sports Authority and A&P – or Midwestern retailer Shopko, which announced its bankruptcy last month.
Though there are challenges such as zoning restrictions and the cost of land and construction, the report found big-box spaces are ideal for logistics because they typically offer dock doors, ample parking, and clear heights that are compatible with industrial usage.