Huge Field Retail Eyed as Good Candidate for Warehouse Conversions

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Big Box Retail Eyed as Good Candidate for Warehouse Conversions

With retail struggling during the pandemic, there are many arguments in favor of converting collapsing shopping malls into new uses.

Large box retail has not suffered as much as mom and pop stores, gyms, and restaurants. Still, investors and developers are looking for warehouse conversions to capitalize on the higher returns and strong rental growth of the logistics sector, said Stuart Taylor, senior director of retail investments at JLL in a new one post Office.

The reason for these conversions is straightforward: there is an oversupply of retail buildings in the US and many defunct shopping centers have already been converted for industrial use. For example, Seefried Industrial Properties' Randall Park and Euclid Square shopping malls in Ohio have been converted into fulfillment facilities, resulting in a 20% increase in rental space over assets, according to JLL.

The pressure on the logistics industry to keep up with the e-commerce boom is another driver for these changes.

Converting large stores into warehouses is a logical next step, writes Taylor.

Most of these stores are located near metropolitan areas and near major logistics centers, which makes them good places for quick delivery and returns, according to JLL.

Low location coverage is also beneficial for big box to retail conversions. Buildings often take up half of the property, while customer parking spaces take up the rest of the space.

Since the physical structure of large-scale shopping centers is similar to industrial facilities, these conversions allow the landlord to expand the locations with income-generating industrial buildings without having to adapt existing buildings.

“Prime large format retail locations will continue to be in high demand from retailers. However, as long as logistics trends continue on their current path, there will be pressure to remodel sites that have underutilized land, a secondary mix of tenants, or the site competes with a similar asset in the same space, ”says Taylor.

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