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Corporate Campuses Being Converted to Industrial Spaces

Mar 31, 2023

The pandemic started a shift: on one hand, remote workers have left corporate owners and tenants with perhaps more offices space than they may need. And on the other hand, our online purchasing habits have driven up demand for warehouse space. 

And now the market is doing what seems logical, if not a bit expensive: turning corporate campuses into distribution centers. 

As CoStar reported this week, Nationwide started a $20 million renovation of one of its corporate hubs in Pennsylvania in 2019, but now it is being converted into industrial space. 

“We can make these deals pencil now because of the acceleration of industrial rents, especially for high-end industrial and flex space,” Velocity Ventures founding partner Zach Moore told CoStar News. “There’s a major movement in pricing that is driving the opportunity, which was never a possibility before.”

“While there are still plenty of development and legislative barriers to overcome, the rate of office-to-industrial conversions has gained momentum in recent years as pandemic-related shifts to remote work — and now layoffs — reduce office demand. That comes as widespread real estate consolidation and a desire for higher-quality buildings have accelerated the obsolescence of some older, sprawling office properties with fewer amenities. More than 15.2 million square feet of office space is now being converted into logistics use, according to Newmark and CoStar data. Most of that is concentrated in markets where density and land constraints have pushed demand for industrial space higher than the years before the pandemic,” the article reported. 

David Harrison