Retail and Industrial Synergy: Why Retail Professional Should Be Thinking about Integrating an Industrial Vertical Into Your Business

Retail and industrial real estate are two of the most important sectors in the real estate industry. Both of these sectors play a significant role in the economy and are vital to the success of various businesses. While they may seem like completely separate entities, over the last few years especially, the relationship between retail and industrial real estate is strengthening. In this blog post, we will explore the relationship between these two sectors and how they affect each other.

What is Retail Real Estate?

Retail real estate refers to properties that are specifically designed and used for the sale of goods or services to consumers. This can include shopping malls, strip malls, department stores, and standalone retail stores. Retail real estate is often characterized by high visibility and accessibility, as well as a focus on attracting foot traffic and customers.

What is Industrial Real Estate?

Industrial real estate, on the other hand, refers to properties that are used for manufacturing, warehousing, and distribution purposes. This can include factories, warehouses, distribution centers, and research and development facilities. Industrial real estate is typically located in areas with access to transportation infrastructure, such as major highways, rail lines, and airports.

The Relationship between Retail and Industrial Real Estate

At first glance, it may seem like there is little to no relationship between retail and industrial real estate. After all, one is focused on selling goods and services to consumers while the other is focused on manufacturing and distribution. However, the two sectors are actually quite interconnected.

For one, industrial real estate plays a critical role in supporting the retail sector. Without warehouses and distribution centers, retailers would not be able to get their products to market. These facilities serve as the backbone of the supply chain, allowing goods to move from manufacturers to retailers and ultimately to consumers.

Additionally, the location of industrial real estate can have a significant impact on retail real estate. When deciding where to build new retail properties, developers often consider the availability of nearby industrial facilities. This is because these facilities can provide a steady stream of customers and foot traffic, particularly for retailers that sell products that are often associated with industrial activity, such as construction materials, tools, and equipment.

In some cases, industrial real estate can even be repurposed for retail use. This is particularly true for older industrial properties that may no longer be suited for manufacturing or warehousing. By converting these properties into retail spaces, developers can breathe new life into older buildings and create unique shopping experiences for consumers.

On the flip side, the retail sector can also have an impact on industrial real estate. For one, retailers often require industrial properties to be located in close proximity to their stores. This is because they need to be able to quickly restock their inventory and respond to changes in consumer demand. As a result, industrial properties located near retail centers are often in high demand.

Additionally, the success of the retail sector can have a direct impact on the demand for industrial real estate. When retailers are doing well and experiencing strong sales growth, they may need to increase their inventory levels and expand their distribution networks. This can lead to increased demand for warehouse and distribution space, as well as a need for more manufacturing facilities to produce the goods being sold.

Finally, it’s worth noting that the relationship between retail and industrial real estate can also be impacted by technological advances. As e-commerce continues to grow, retailers are increasingly relying on industrial properties to serve as fulfillment centers for online orders. This has led to a surge in demand for warehouse and distribution space in recent years, particularly in areas with large populations and high levels of e-commerce activity.

While retail and industrial real estate may seem like separate entities, over the last decade as accelerated by the pandemic, the two asset classes have become more and more interconnected.?In a challenging 2023 economy, where retail inventory is tightening, inflation is rising and retail development is taking a pause, it may be a good opportunity for we, as retail professionals, to educate ourselves further on the industrial asset class as there is a symbiotic, growing nature between our world and theirs.