Over the course of the past six months, various experts have predicted that the warehousing sector is well-positioned to successfully weather the pandemic, due to a shift toward more regional supply chains. As import flows from China normalize and domestic e-commerce demand increases, shippers are on the lookout for more local space to stage inventory. Simultaneously, a wavering economy makes saving costs important. Retrofitting retail properties can enable them to do both.
Big-box stores are often surrounded by large parking lots and can have loading docks with clearance heights compatible with industrial use, according to CBRE. Morris said he expects more of these types of conversions to happen over the next five years as collocating fulfillment space in customer population centers becomes a higher priority for shippers.
When embarking on a retail conversion project, it's important to consider, "What does the space need to be?" he said. "Because, on average, this retail property would normally have a higher base cost than a logistics property on the same land. It is important for these properties to be converted in a fashion that is more specific and more directly targeted towards exactly what the user needs will be."
If the retail property is currently performing well, and market intelligence suggests that it could continue to do so, a hybrid retail-fulfillment model could work best, Morris said.
However, if "the value of the location as a retail property has significantly declined, then that wholesale conversion, to a full logistics and industrial location is going to be more valuable and make more sense," he said.
Generally, properties without existing docking bays or compatible ceiling heights are often demolished in favor of new-build warehouse facilities, the report said.
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