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JLL Ditches D.C.-Area Retail-To-Industrial Initiative, Citing Lack Of Demand

An empty storefront on Bleecker Street in 2018

JLL is winding down a D.C.-area initiative dedicated to turning vacant retail space into logistic centers after just a year in operation.

Launched along with a national practice group in fall 2020, the initiative was dedicated to facilitating the conversion of former shopping centers and big-box retail anchors into distribution centers. However, JLL has determined there is not enough demand for that strategy to keep the group running in the D.C.-area, the Washington Business Journal reports.

"We just did not get a lot of traction because there was little demand, and retailers were not willing to put up with the zoning and operational challenges of industrial/retail cohabitation for the short term," JLL Senior Managing Director John Dettleff, who specializes in industrial and flex space, told the WBJ.

The idea was to link landlords with empty retail space with online companies that needed logistics operations in high-density areas. But the realities of converting retail to warehouse are too onerous for there to be enough interest to justify the group.

"Our conclusion was that the best solution for short-term warehouse space is actual warehouse space. It’s better for us to focus our efforts on finding 'shadow' space within the warehouse market than trying to adapt to retail space,” Dettleff told the WBJ.

While the D.C.-area initiative is winding down, JLL still has a national retail-to-industrial practice group it launched around the same time. JLL Industrial and Logistics President Craig Meyer and Retail President Naveen Jaggi, who co-lead the group, confirmed in a written statement to Bisnow that it is still operating.

“We can confirm that the national Retail Industrial Task Force is still very much active and, in fact, we are continuing to double down on our efforts in this area from a national perspective," Meyer and Jaggi said in the joint statement. "We’ve actually seen strong client engagement from both investors and occupiers with demand around the trend of converting viable retail assets to industrial for last-mile logistics and other creative industrial purposes. That said, this does not mean that conversion to industrial is going to be a viable solution for every retail property or even every sub-market."

The issue of empty retail space has plagued cities across the country, as the coronavirus pandemic has accelerated consumer moves toward online shopping. Landlords have been looking for ways to monetize stores and in New York City, for example, many have used flexible lease terms and hefty incentives. In some cases, some have even reimagined and marketed retail space for office users.

This year, delivery startups have been clamoring to lock down leases. Jokr, which pledges to deliver goods to buyers within 15 minutes, with customers making purchases of items on an app, now has around 200 micro-fulfillment centers in 15 cities. Companies like Gorillas and 1520 have also been signing long-term leases for storefronts at a rapid clip and turning them into miniature warehouses.

CORRECTION, DEC. 22, 1:30 P.M. ET: A previous version of this story incorrectly stated that JLL had shut down its national industrial-to-retail practice group, citing a report from the Washington Business Journal. Bisnow had requested comment from JLL and didn't receive a response before publication, but the firm later said it was a D.C.-area initiative that shut down, and its national group remains active.