Can we convert retail dark stores into industrial space?

It’s a fact of life: we want what we want when we want it. One-click purchases and two-day shipping revolutionized e-commerce for consumers—and with demand for online orders showing no signs of slowing, retailers are on the hunt for more and more industrial real estate to serve them what they’re clamoring for. Some are wondering if dark stores can answer the need. 

The rise of dark stores 

The dark storefront concept is a trend that began during the pandemic. As many brick-and-mortar stores struggled to stay solvent, the number of dark stores grew significantly. 

These micro-warehouses shut down the in-person shopping experience and crawled into urban landscapes and existing storefronts. For traditional brick-and-mortar stores, this gave a competitive edge against online-only retailers and provided shoppers with the option for home delivery, online pickup and curbside pickup. 

But dark stores are not a one-size-fits-all solution—several factors need to be considered before these conversions can happen. For example, the size of the store greatly impacts what kind of product can be stored and how much space is needed for inventory. And when it comes down to the interior of the building, floor and automation strategy will make or break a site given the strength and depth of the floor and the process of how boxes will be extracted. 

Urban logistics and fulfillment 

Proximity to customers and transportation options are two factors retailers must also consider. It’s down to the block and even the mile within dense urban markets and retailers need to be at an appropriate distance to reach customers—especially with time sensitivity at stake. 

But dark stores aren’t the only solution. The global shift in e-commerce shed light on the need for industrial warehouses to be closer to urban landscapes as well. Retail had always been in the center of residential areas, putting distribution and fulfillment centers 50 to 100 miles out. 

“Retailers are looking to solve for more than just, ‘location, location, location,’” said Kris Bjorson, International Director for JLL Industrial. “Now, companies are focused on ‘logistics, logistics, location.’”

In our latest Shaping the Retail and Industrial Convergence podcast, Research Director James Cook sits down with Bjorson, Seth Geldzahler, Senior Managing Director of JLL Industrial, and David Rabinowitz, Attorney at Goulston & Storrs to discuss the considerations associated with converting retail dark stores to industrial, the legal challenges, rent conversion and what it means for the future of industrial and retail real estate.