A long vacant Sam's Club in Phoenix has been reborn as an industrial distribution facility—illustrating the overarching market trends for both asset classes in a single project. Developers DPC Companies and Confluent Development along with contractor Graycor Construction Co. redeveloped the 115,000-square-foot box and an adjacent Go Kart Track into HUB 317. The new class-A industrial property is 225,000 square feet.
“With some big boxes that are failing are absolutely good candidates for these projects. There is large square footage under one roof that is pretty simple to demise up into smaller spaces for flex industrial use,” Rusty Martin, project executive at Graycor Construction Co., tells GlobeSt.com. “This property had been vacant for awhile and it had gone through a few different hands. That made it a good deal from a purchasing standpoint, and due to its location, it fits a niche in this market for a distribution center of that size.”
There are a lot of benefits to converting a big box retail property into industrial. First, the box already exists, making it significantly less expensive. Converting retail boxes also brings new industrial product to the market much more quickly than new construction. This conversion project took seven months and included the addition of more than 100,000 square feet of ground-up construction. “The box is already there, and that is a big chunk of the cost,” says Martin. “The investment is in repurposing the exterior of the building to make it work for an industrial use, especially if there isn't a truck courts or dock infrastructure already in place. That is really where the investment is.”
Converting the zoning from retail to industrial is the biggest challenge. Because industrial product is considered a much different product use than retail, local municipalities are hesitant to allow the use, even on flex or light industrial product, like this. “The biggest challenge that developers are experiencing is zoning issues. This particular developer tried to redevelop another old Sam's Club in another part of town, and the municipality there would not adjust the zoning to allow for flex industrial,” says Martin. Flex industrial is a very clean and user-friendly product type.”
With more retail boxes sitting vacant and the need increasing for industrial distribution facilities, especially those close to population centers, Martin says that municipalities are warming to the idea of industrial. He is also seeing a rising demand from developers to convert boxes into retail space. “The need always helps to drive innovation. As municipalities see a demand from end users, I think that they will be willing to work with developers to keep those users in their towns,” he says. “Sometimes, cities don't see the connection between retail and industrial. So, we have to help them see that this is a value-add. It isn't value taken from.”
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Kelsi Maree Borland
