Robust growth in warehouse/distribution center development and increased adoption of new warehouse types are creating opportunities for owners of vacant or underperforming retail spaces.

In a year-end blog post entitled “Adapting to Change,” NAIOP-MD member Bohler listed retail-to-warehouse conversions among its top five insights from 2020.

“With the increase in e-commerce demand due to COVID-19, owners and developers are finding new opportunities by converting underperforming big boxes and shopping malls to warehouse and fulfillment center space. With large buildings, generally ample parking and the typical access to major traffic corridors, these centers may have all the necessary criteria for a retail-to-warehouse conversion,” Bohler reports.

Several factors can determine the suitability of a property for a warehouse conversion. According to Bohler, those include:

~ Existing building height: Industrial tenants often require clear heights of 50-60 feet which isn’t available in all retail spaces. Structural modifications can create desired heights but the project may require a height variance from the local jurisdiction.

~ Utility capacity: Warehouse operations, especially highly automated systems, can require larger electrical, data and water service than standard retail centers.

~ Loading dock height: Depending on whether a tenant is looking to open a standard or last-mile distribution center, docks may need to accommodate transport trucks or small delivery vans.

~ Pavement strength and traffic patterns: Existing pavement may have to be upgraded to heavy-duty asphalt or concrete to accommodate truck traffic. In addition, developers may have to alter circulation patterns within and near the site, including upgrading nearby intersections or creating an offsite roadway.

E-commerce and distribution center trends, however, could make such conversion projects attractive to some property owners. “The Evolution of the Warehouse” – a report by the NAIOP Research Foundation released in late 2020 – describes how more companies are looking to converted retail space, Class B office space and even underutilized parking lots to create last-mile warehouses, micro distribution centers and “darkstore” distribution centers (former retail spaces that serve as distribution centers and provide curbside pickup for local consumers).