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JLL Launches Group Dedicated To Retail-To-Industrial Conversions


One of the nation's largest commercial real estate services firms is betting on a wave of retail-to-industrial conversions.

JLL on Tuesday announced the formation of a "task force" dedicated to facilitating the process of converting former shopping centers and big-box retail anchors into distribution centers, CoStar reports. The group is composed of members of JLL's retail and industrial practices in what the company is calling a first in the industry.

By now, the effects of the coronavirus pandemic on shopping behavior have been well-documented: foot traffic at shopping centers has not recovered since most retail stores reopened after the initial surge of the virus in the spring, CoStar reports. JLL estimates that the past six months have caused the timeline of retail's transformation to an online platform to accelerate by three to five years, heightening the urgency for owners of shopping centers to keep their properties relevant.

Two of the biggest retail owners in the U.S., Simon Property Group and Brookfield Propertieshave acknowledged the need to reactivate spaces once occupied by department stores like JCPenney and Macy's, and using them for a new form of shopping appears to be among the most logical choices. But for as much sense as repurposing makes, in practice the process is fraught with complications.

Converting a department store shell into a warehouse is an awkward fit, and so far the process of demolition and new construction is more common. Even then, changing the use of land with proximity to residents means dealing with potentially angry neighbors and onerous zoning restrictions — complications that JLL says its new task force is purpose-built to deal with.

Even now, not everyone is convinced that the retail-to-industrial transformation will be a common story. Prologis recently estimated that about 8M SF of new industrial space per year in the U.S. will be added in this way in the coming decade, a small fraction of overall industrial development.