Trends and Hot Topics

NAIOP Report: Industrial and Retail Real Estate Sectors Will Converge

Washington – A new report published by the NAIOP Research Foundation finds that the pandemic and the e-commerce trends that preexisted it have led to a dramatic confluence of the industrial and retail real estate sectors.

“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,” according to New Places and New Spaces for E-commerce Distribution: Three Strategies Bringing Industrial and Retail Real Estate Closer Together.

“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,” according to the report.

The report examines the risks and opportunities associated with three related strategies:

  • Functionally obsolete shopping centers can be attractive targets for conversion to distribution space given their size and location.
  • Retailers are adding distribution capacity and online order pickup and return services to existing retail stores to enhance their customers’ shopping experience.
  • Some developers are pioneering mixed-use developments that collocate retail and industrial space.