New Trend Emerges As Retail Combines With Fulfillment

Bringing retail space and micro-fulfillment distribution centers within a mixed-use development is a smart trend worth watching, according to a new NAIOP report on e-commerce.

It is happening in a diverse array of locales, albeit sparingly, but for logical reasons, NAIOP reported, because “both thrive when located on primary commercial arterials and in areas with strong demographics.”

In a reciprocal situation, retail outlets serve as amenities for those who work in industrial parks just as those who work in industrial parks serve as a reliable customer base for retail outlets, NAIOP said.

“These factors suggest co-locating retail space and industrial space can be beneficial when steps are taken to prevent one from creating negative externalities for the other,” according to the report. “The devil is, of course, in the details, and real estate developers must eliminate potential sources of friction between industrial and retail tenants as best they can.

For example, “Eighteen-wheelers and [pedestrians] don’t mix,” Spencer Levy, global chief client officer and senior economic advisor at CBRE said in prepared remarks. “So, think about how to keep them from interacting in ways you don’t want them to interact.” 

Municipal Policymakers Warming to the Idea

The NAIOP report states that increasing the number of ingress and egress points throughout a project to segregate retail and industrial traffic can help, as well as conducting traffic studies to understand how trucks will move through sites. 

Furthermore, NAIOP said that municipal policymakers are warming to the idea that modern distribution facilities are not inherently incompatible with retail, office or multifamily space.

Another benefit would be the potential new jobs these developments could create.

Ed Klimek, principal at KSS Architects, said these projects will thrive more when developed together compared to how they’d each perform on their own.

Kevin Evernham, regional vice president at Ware Malcomb, acknowledged that retail is going to logistics and logistics is going to retail and that these spaces can be designed to work together, but he warned that institutional pressures could keep developers from leaping headlong into this form of mixed-use development. “Debt and equity investors want predictability,” he said. “They generally don’t want to put their money into something that is new and unproven.