Retail Warehouses are Taking Over Empty Spaces

A rising demand for retail warehouses from big-box stores are turning empty spaces, such as shopping malls, office buildings and even golf courses, into industrial sites to fill e-commerce needs.

Store closings and stay-at-home orders due to the Covid-19 pandemic fueled a massive increase in online shopping over the last year that left retailers scrambling to accelerate their omnichannel capabilities. The demand has also “sparked a race for warehouse space,” CNBC reported. In fact, demand for warehouse space at least 200,000 square feet or larger hit a record in North America last year, according to CBRE. Even if online spending slows as vaccinated consumers return to stores, warehouse space is still likely to be competitive.

And that means businesses are getting more creative to find real estate. E-commerce giant Amazon, which said last year it planned to open more than 1,000 new delivery hubs to fulfill online orders, is even building distribution centers on top of old golf courses, as well as older, vacant malls. Other retailers with especially high appetites for warehouse space include Burlignton, TJ Maxx, Ross Stores, Gap, Williams Sonoma, Wayfair and Home Depot.

Among grocers, whose needs include refrigerated space, the competition is even tighter, as demand in the sector has skyrocketed over the last year with more individuals cooking at home and refraining from heading out to restaurants.

“We’re really just seeing the tip of the iceberg as far as demand and growth of e-commerce,” Mindy Lissner, a CBRE executive vice president, told CNBC. “Once you start it, you figure out how easy it is to order things online.”

Office buildings, many of which are located just off highways, are a hot commodity for warehouse flips. The surge in repurposed spaces bucks the previous trend of retailers building massive warehouses and distribution centers in more remote locations, even if the real estate is more expensive within cities.