The conditions are ripe for retail-to-industrial real estate conversions, especially as distressed malls look for ways to uncover new value, according to a report from commercial real estate services firm Newmark, released earlier this month.
The report, Retail-to-Industrial Transformation: As the Retail Landscape Changes, Can Outdated Mall Anchors be Reborn as Fulfillment Centers?, examines the rise of e-commerce and accompanying demand for warehouse and fulfillment center space with the decline of traditional malls across the country. The researchers point to the changing role of traditional mall retail space that was accelerated during the pandemic, highlighting both the opportunities and challenges facing retailers and property owners.
“The challenges in the U.S. retail market were exacerbated by the pandemic in 2020, resulting in further softening of fundamentals throughout the country, prompting mall owners to more aggressively consider alternative uses for their assets,” according to a Newmark spokesperson. “Tight industrial market conditions are accelerating these discussions, particularly as ‘buy online, pick up in store’ (BOPIS) programs increase retailers’ need for warehouse space.”
The researchers highlighted three primary factors that are driving retail-to-industrial conversion potential:
Regional malls have experienced an evolution over the past 50 years, as the once-celebrated destinations face increasing competition for shoppers and their discretionary spending, they wrote. Consumer demand for more open-air shopping areas has led to a decrease in the number of new malls constructed and many retailers leaving enclosed malls for these newer centers.
Department stores have been “anchors” wherever they were located, whether it was a downtown city block or a suburban regional mall. The dwindling number of these stores creates new challenges when space is vacated and owners look to find new tenants, they said. The challenges in the U.S. retail market were exacerbated by the pandemic in 2020.
Converting vacant anchor spaces at shopping malls into distribution or fulfillment centers in service of e-commerce offers considerable upside as a redevelopment play. In some cases, a full property conversion may be the highest and best use of the property, although the conversion process can be expensive and complex.
The researchers admit that, to date, mall-to-fulfillment center conversions have been limited, but they point to some recent regional projects that may bear fruit. Examples include:
Department store Macy’s said last fall that two stores it had closed earlier in the year would be repurposed as fulfillment centers. The retailer also emphasized recent efforts to promote BOPIS and curbside delivery, including the conversion of stores in Dover, Delaware, and the Denver suburbs into omnichannel service centers.
Walmart is testing the conversion of part of its stores into fulfillment centers, with plans to use the front half of some buildings for typical shopping while the back half would be converted into warehouse and fulfillment center use.
At the end of 2020, the Worcester, Massachusetts, Planning Board approved the proposed redevelopment of Greendale Mall into a last-mile distribution and fulfillment center for Amazon. This would be the first such conversion in New England, according to the report, which also said the mall owner had planned to convert the space to mixed-use development but changed course due to the accelerated rise of e-commerce during the pandemic.
“Not every obsolete mall site will work as a fulfillment center but repurposing these sites—and sometimes existing buildings—to their highest and best use can be a win for the asset owners and the local community as the retail landscape evolves,” the researchers wrote.
Go to Newmark.com for more on the report and other industrial real estate trends.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.