HOUSTON – (Realty News Report) – Pushed by the pandemic and inevitable trends, unneeded store space is being converted to e-commerce warehouses.
In other words, Sears is out and Amazon is in.
“Retail-to-industrial property conversions are accelerating across the U.S., driven by the growth of e-commerce. There are now 59 such projects that have either been completed, proposed or are underway since 2017—up from 24 in January 2019,” according to a CBRE Research report. “These projects total approximately 13.8 million SF of retail space converted to 15.5 million SF of industrial space.”
Amazon has been talking to shopping mall superpower Simon Property Group about placing large Amazon fulfillment centers in vacant anchor store space in malls, according to the Wall Street Journal.
With retailers like J.C. Penney and Sears going dark, there’s vacancy galore in many malls. It’s not just anchors. With the pandemic raging, scads of in-line stores and mall restaurants are shuttering their doors, too.
E-commerce and bricks-and-sticks retail stores have been moving toward a bloody battle for years as e-commerce gradually gained retail market share.
In recent years, countless news articles and speakers presentations at real estate conferences warned of the upcoming “Retail Armageddon.”
But the Covid-19 pandemic turned up the heat, raised the stakes, and accelerated the pace toward a final showdown.
“Stay-at-home orders across the U.S. have introduced an entirely new customer base to e-commerce,” CBRE reported. “Adobe estimates that online sales in April and May were 7 percent higher than those of the 2019 holiday season and were $52 billion above normal online sales in April and May. The disruption to the retail sector and the growth of e-commerce will continue to increase the viability and payback of retail-to-industrial property conversions.”
E-commerce operations are requiring “last mile” distribution facilities which enable quick and nimble delivery to customer’s doorsteps. The spread of grocery e-commerce also pushes the conversion of retail space to distribution space as the “stores becoming warehouses” trend expands..
H-E-B, a major Houston grocer, converted its small 28,000 SF store at Memorial at Dairy Ashford to an e-commerce location a couple of years ago.
A significant surge in warehouse construction around Houston has been attributed in large part to e-commerce distribution space.
CBRE recently reported 18.8 million SF of industrial space is under construction in the Houston, a record high. With the new space coming online, industrial vacancy hit 6.9 percent in the second quarter.
Retailers occupied significant portions of the new warehouse space in Houston. Dollar Tree was committed to 1.2 million SF and Five Below was down for 860,000 SF.
An 850,000-SF Amazon e-commerce fulfillment center has broken ground in Richmond, west of Houston near the Grand Parkway.Trammell Crow is the developer for the facility, which will create 1,000 jobs.
So with the need growing for e-commerce warehousing and retailers like J.C. Penney and Sears closing stores and filing for Chapter 11 – the future is clear.
Malls may never be the same.
Where are the top cities for retail to warehouse conversions?
“The top five markets for these conversion projects are Milwaukee, Cleveland, Chicago, Omaha and Dallas/Ft. Worth, accounting for one-third of the total number of projects nationally,” CBRE said. “This is primarily due to the number of ‘dead malls’ in the Midwest.”
Aug. 19, 2020 Realty News Report Copyright 2020
File: Mall Stores Becoming Warehouses
File: 13.8 Million SF, per CBRE. Mall Stores Becoming Warehouses in Space Conversion