Can Stranded Office Buildings Become Logistics Hubs?

March 2024

The e-commerce industry needs more last-mile delivery centres, but logistics space is tight. Here's a novel idea: Could we repurpose stranded, suburban office assets into logistics hubs?

Pros:

• Prime Locations: Suburban offices are often conveniently located near arterial roads and connections, ideal for last-mile delivery.

• Revitalisation Play: Filling vacancies would boost occupancy and generate income for owners.

Cons:

• Structural Challenges: Upgrading offices for logistics may be expensive and time-consuming.

• Regulatory Hurdles: Zoning changes and permits could slow redevelopment.

The Numbers Tell a Story:

While traditionally, the office-industrial rental delta would exclude this concept from further thought, effective rents for both sectors continue to converge.

The Takeaway:

Comprehensive analysis is needed but with sustained high office vacancy rates, growing pressure on aging office assets and the continued supply-demand imbalance in logistics hubs, options beyond residential, BTR or assisted living office conversions may be worth exploring.