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Prologis Says The Great Retail-To-Logistics Conversion May Be Overhyped

Prologis sees lots of demand for last-mile logistics from the likes of Amazon — but not much of that demand will be met by converting old retail assets.

A new research report from the world’s largest owner of industrial property has concluded that the much-anticipated trend of converting retail assets to last-mile logistics might actually be a bit of a damp squib.

In its report, Logistics Real Estate – Sizing the Retail Conversion Opportunity, Prologis said that retail conversions would likely account for less than 1% of new logistics stock in the U.S. between now and 2030, and that in Europe the figure could be even lower.

Prologis estimated retail-to-logistics conversions in the U.S. over the next decade will total about 8M SF per year. With total logistics stock in Prologis’ U.S. markets expected to rise to 10B SF by 2030, that means retail-to-logistics conversions would account for less than 1% of that figure.

Bisnow is hosting a webinar on the art and science of repurposing real estate at 1.30pm on Wednesday 30 September. Sign up here.

Holding back the trend will be economic, political, physical and legal factors. Even if retail space is converted, other uses like residential might provide a higher value. 

Politically, it might not be simple to change planning consent for retail use to industrial, and physically, it might not be cost-effective to convert retail space to logistics uses.

The challenges in Europe are particularly acute.

“Europe has a higher number of high streets in historic city centres and fewer troubled pan-regional retailers such as JCPenney or Sears in the U.S.,” Prologis Vice President of Research & Strategy Dirk Sosef said. 

The trend might be difficult to achieve, but it clearly isn’t impossible. In London, Prologis is buying a retail park in Edmonton for conversion to logistics. In its report, Prologis said secondary malls were likely to see the highest rate of conversion.

Meeting the last-mile needs of e-commerce providers will be one of the great challenges for the property industry of the next decade. Amazon alone is reported to be looking for 1,500 last-mile facilities in the U.S. 

Bisnow is hosting a webinar on the art and science of repurposing real estate at 1.30pm on Wednesday 30 September. Sign up here.
Related Topics: Prologis, Retail conversion