Vacant Retail Locations Being Repurposed for Ecommerce Fulfillment

In an indicator of the continuing evolution of retail, more shuttered stores and malls are being converted to industrial space, especially for ecommerce fulfillment, according to a new report from commercial real estate firm CBRE.

The firm identified 24 separate projects in 18 different markets since 2016, including former Toys R Us and Sam’s Club locations, and obsolete malls being demolished and rebuilt as warehouses in Baltimore, Atlanta, Chicago, Detroit and several markets in Ohio.

In all the projects have turned or are turning 7.9 million square feet of retail space into 10.9 million square feet of new industrial space, either by conversion or new construction.

“In nearly every market in the U.S. there are sites where this kind of repurposing could work, at least on paper,” said David Egan, CBRE’s Global Head of Industrial and Logistics Research. “But many conversions are more challenging to execute than it might seem, given that the developer-owner of each site often needs to get a wide group of stakeholders to agree on a fairly dramatic change.”

These locations are ripe for ecommerce fulfillment retooling for a number of reasons: The space is now idle, in prime spots for local distribution and there is a dearth of available commercial/industrial space; CBRE said most of the projects are in markets with vacancy rates under 5%. They’re also often big-box structures with high ceilings and docks to facilitate distribution use.

One hang-up is these former store and mall locations have mortgages issued based on higher retail lease rates, not lower industrial ones. “Any landlord looking to convert their center also would need the approval of their lenders, city officials, neighbors and in many cases the center’s other retailers,” CBRE wrote. “Some might not appreciate the increased truck traffic and decreased shopper traffic.”

While this ecommerce fulfillment conversion trend faces a number of challenges, CBRE expects it “will continue to grow as the balance between brick-and-mortar retail and ecommerce shifts to necessitate more logistics space and less physical retail space.”

You can view an interactive map of the conversion projects here.

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