By: Dustin C. Read, Ph.D./JD
The COVID-19 pandemic dramatically accelerated demand for e-commerce. Correspondingly, it accelerated demand for distribution space from which to fulfill purchases made online. These conditions have led developers in land-constrained markets to consider new formats for distribution buildings and pursue redevelopment projects that would not have been feasible before 2020. At the same time, brick-and-mortar retailers have responded to customer preferences by expanding online order pickup services and shipping orders from retail stores. Together, these trends are contributing to the convergence of industrial and retail real estate, with implications for developers, investors and building owners.
The NAIOP Research Foundation commissioned this report to examine three trends related to this convergence: the conversion of shopping centers to distribution centers, adding distribution uses to existing retail buildings, and the development of mixed-use properties that include both distribution and retail. The author conducted secondary research and interviewed developers, investors, architects, analysts and other commercial real estate professionals to identify the opportunities and risks associated with each strategy. Some findings include: