Retail-to-Industrial Projects Grow as E-Commerce Expands

Projects converting retail space into industrial space are continuing to grow, as e-commerce becomes more widespread and industrial rents reach all time highs, a new CBRE report finds.

Since 2017, a total of 13.8 million square feet of retail space has been converted to 15.5 million square feet of industrial space across the country, according to CBRE, which expects the trend to continue.

The survey found that 59 conversion projects were completed, proposed or underway since 2017, which is a substantial increase from a previous survey in January 2019, when only 24 projects were counted.

Of the 59 projects, 40, or 67.8%, are conversions or adaptive reuse. The remaining 19 projects are properties that were demolished for new construction.

John Morris, Americas Industrial and Logistics and Retail Leader for CBRE, said in prepared remarks that the activity should continue as retail sites become more economically viable.

“As online retail evolves and expands, many retailers and developers will find opportunities to convert underperforming stores into final-mile distribution sites to support E-commerce operations,” Morris wrote.

According to the survey, the top five markets for the conversion projects, making up a third of them, are Milwaukee, Wisconsin; Cleveland; Chicago; Omaha, Nebraska; and Dallas/Fort  Worth.  Much of that is related to the number of “dead malls” in the Midwest, the report said.

However, as the retail market continues to evolve, conversion projects are expected to increase in most U.S. regions, according to CBRE.

The survey reports five retail-to-industrial projects in Milwaukee and Cleveland, four in Chicago, and three in Omaha and Dallas/Fort Worth.