BDO Consultant Says Industrial Repurposing an Alternative for Surplus Retail Real Estate

In the latest edition of The REIT Report: NAREIT’s Weekly Podcast, Dennis Duffy, director with BDO Consulting, discussed potential conversions of retail real estate into industrial properties.

The rise of e-commerce and spike in retail store closings in the United States have generated speculation about the future of country’s retail property inventory. REITs generally own high-quality properties, which means their portfolios are less exposed to pressures from online retail. Additionally, many REITs are adapting their properties to the changing tastes and preferences of consumers.

However, some retail property owners are considering transitioning their assets into industrial properties, according to Duffy. He noted that demand for industrial space does not appear likely to come down in the near future.

“Population growth continues in the U.S. Demand for consumer goods continues in the U.S.,” Duffy said. “Inadequate existing infrastructure also will create demand for logistics.”

Duffy also pointed out that delivery companies will need logistics facilities that are closer to their client base. Industrial space “has always been on the edge of town,” according to Duffy.

“From the standpoint of logistics… I expect that any of the retail properties that are surplus or about to be repurposed would probably occur in high-demand areas or those best-suited to deal with the existing infrastructure,” Duffy said.

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