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The Why Behind Adding Fulfillment Space at Shopping Centers

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Within five years, U.S. retail centers will begin to rely heavily on automation and synergistic use of space to promote omnichannel sales, according to a new ICSC Research report, Opportunities and Challenges for Retail to Warehouse Conversion. That will require more industrial space.

According to an ICSC survey, 53 percent of U.S. adults expect shopping centers and stores, in light of COVID-19, to invest in onsite inventory, distribution and pickup options. Demand for warehouse space is growing rapidly, according to ICSC’s citation of CBRE: For the period from April 15 to May 14, U.S. industrial lease renewals and new leases jumped 43 percent compared with the previous 30-day period. The firm also says about 59 industrial projects either have been completed since 2017, are underway or are proposed.

And retail space that’s well-zoned and accessible to freeways with few physical restrictions makes a good candidate for conversion to warehouse, the report notes. One recent example is a Washington Prime Group scheme to repurpose the 80,000-square-foot former Sears store at its Morgantown Mall in West Virginia into a logistics, distribution and fulfillment center serving 11 hospitals, as well as smaller clinics, in the WVU Medicine network.

Zoning codes can form a roadblock to industrial conversions, but onerous codes may be up for renegotiation as some municipalities tap this new source of property tax revenue and aim to better serve local communities, according to the ICSC report. To find success, developers must educate leaders about how fulfillment space can benefit retail and must allay community concerns around traffic, heavy trucking and air pollution, the report notes.

2020 ICSC.

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