Developing Strip Malls Into Micro Fulfillment Centers

There is an interesting article on Bloomberg, Automated Grocery Warehouses Could Be the Future for Strip Malls, which has some interesting analysis for owners and investors in strip malls and older retail centers. The article highlights some commercial real estate industry analyst who think there could be a potential for strip mall owners to utilize vacant space as fulfillment centers for grocery stores or other companies looking for direct to consumer channels.

Strip mall landlords should consider building automated warehouses for grocery store tenants to capitalize on the newfound demand for online delivery brought on by the coronavirus pandemic, BTIG LLC said in a note Monday.

Analysts Michael Gorman and James Sullivan said real estate investment trusts that own shopping centers should consider adding “microfulfillment centers” (MFCs) to food markets already on their properties. The analysts said those facilities can cut down the time it takes to fulfill an online order to five minutes from one hour and enhance productivity in a number of other ways.

“Developing cutting edge microfulfillment centers in their properties could fix critical gaps in online grocery fulfillment, increase store productivity and make REIT shopping centers even more critical real estate,” Gorman and Sullivan wrote. “We think that REITs with good properties, good grocery tenants, and strong balance sheets should be defensive and generate above-average growth.”

While many real estate analyst see retail property owners and investors having a hard time, looking into utilizing older vacant retail space for direct to consumer operations, could be an interesting option and definitely something to keep an eye on.