Converting Distressed Malls Into Industrial Assets: Q&A

Powers Brown Architecture’s Nazir Khalfe weighs in on the viability of turning underperforming retail assets into last-mile facilities that serve the growing e-commerce industry.

Nazir Khalfe, Principal, Powers Brown Architecture. Image courtesy of Powers Brown Architecture
Nazir Khalfe, Principal, Powers Brown Architecture. Image courtesy of Powers Brown Architecture

What is more profitable: demolishing an entire poor-performing shopping mall and transforming it into a last-mile distribution center or integrating parts of an existing mall structure into an adaptive-reuse project? After conducting an in-depth research study, Powers Brown Architecture found that, in some cases, renovations were more advantageous than destroying a mall or anchor stores to start building from scratch. Savings on construction costs varied between 25 percent and 40 percent, and project timelines were reduced by roughly four months.  

Powers Brown Architecture Principal Nazir Khalfe has 18 years of experience in industrial building design. Here’s what he thinks about the latest trends shaping the industrial sector and the viability of converting distressed shopping malls into last-mile industrial assets.

READ ALSO: Trends That Will Redefine Industrial Architecture, Design

How do you feel about the growing trend of e-commerce? How much has the pandemic accelerated it?

Khalfe: Personally, I’m a fan of e-commerce. As a working parent, I like that I can log in anytime and shop. It frees up time for my wife and I to spend with our son, so we aren’t spending our evenings and weekends running around doing the shopping. E-commerce was already racing forward at an extraordinary pace with Amazon, Walmart, Target and other big-box stores trying to get more facilities close to population centers in order to cut down on the time between ordering and delivery.Tell us about the first steps you take when designing an industrial building.

Khalfe: The most critical piece of design is to make sure the flow of the facility is correct. In addition to that, you need to understand the metrics of what a Class A industrial building is and make sure you are maximizing coverage while also designing what the market needs.

What are the challenges of designing a traditional industrial space? 

Khalfe: The challenges that are posed today are not with the actual building itself, but more site-specific. Sites these days have all sorts of complications on them—such as easements, unmarked underground pipelines and restrictive covenants, for instance—so it comes back to being as creative as possible to maximize the usage of the site.

What trends are shaping the industrial market now?

Khalfe: Today, one of the trends we are seeing for speculative buildings is that the old 32-foot clear is/was the new 36-foot clear. Buildings that are above 500,000 square feet are looking at taller clear heights of 40-foot clear. Circulation paths around these larger buildings are critical so that traffic from pedestrian cars and trucks never mix. Trailer storage is still a necessity, but it seems that accessibility to key road networks has become more important on the site.

READ ALSO: E-Commerce Fuels Industrial’s Unstoppable Engine

Is converting distressed shopping malls into last-mile industrial assets viable?

Khalfe: After conducting deep-dive research into adaptive reuse of distressed retail malls, I would say yes. I do believe it is viable, but really most feasible for malls that were developed before 1990. The reality is it may turn out that only one in 10 or 15 will be viable for a retrofit that could save, from our estimation, $30 per square foot and several months of construction time. Malls typically have all the site infrastructure in place as well as ideal access to road networks and rooftops, thus being perfect for last-mile delivery—a key piece of the e-commerce pie.

While there could potentially be issues with tenant leases, some are easier than others to modify or terminate. Issues with outparcel developments can also arise. I do think you will see more malls being used as land plays where a developer comes in and demolishes the building and constructs a new e-commerce facility. A big mind shift in this development has been the local jurisdiction. They previously would have objected to building a distribution center anywhere close to a mall, but with the current pandemic, they would rather see a thriving e-commerce facility in lieu of a derelict mall.

Are multilevel warehouses the solution for dense, expensive urban areas?

Khalfe: The need for multistorage warehousing in dense urban areas is mostly driven by constricted sites. These are really the only places where the cost of land makes it completely viable.When it comes to industrial projects, what really drives innovation?

Khalfe: The basic geometrics of the warehouse have not changed. The innovation has come in the form of tilt wall panel design—taller height—and building slabs—fewer joints. Buildings need more power due to the potential of more conveyors, etc.

How is technology impacting and changing the landscape for industrial properties?

Khalfe: There isn’t much impact on a macro scale as of now, but with the development of drones and autonomous vehicles, I think that will definitely change. We are seeing that the technology is impacting the products that are being used in speculative warehouses, such as dock leveler packages and LED lighting.

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