The burgeoning office-to-industrial redevelopment trend is expected to pick up traction in 2022, as industrial tenants scramble for space amidst an unprecedented shortage of suitable options.

The industrial market grappled with historic vacancies in the third quarter, with the metric hitting 4.6%. Meanwhile, the office market continued to slump, and older, less amenity-rich product suffered most.

That divergence "is increasingly driving investors and developers to consider industrial redevelopment opportunities for some unproductive office properties," Newmark's Liz Berthelette, Mike Laccavole, and Lisa DeNight write in a new report. They note that since 2018, at least 45 office properties totaling 11.3 million square feet have been redeveloped or are in the process of redevelopment into industrial use. That activity is mainly concentrated in markets with tight vacancy driven by density and a lack of developable land.