Office-to-Logistics Conversions Are Challenging. Here’s Why.
March 24, 2022 | Barbra Murray | Commercial Property Executive
Industry experts weigh in on the scope and feasibility of such projects.
With industrial facilities in record-high demand, it makes perfect sense to take underutilized office properties and turn them into state-of-the-art warehouses.
But don’t expect the trend to be sweeping the country. Only certain office properties in certain locations are viable for such undertakings. And that’s just the short list of criteria.
“A lot of the office conversions we are seeing are of older office buildings or buildings specifically built for a single company,” Nancy Shultz, president of Duke Realty Corp.’s West Region, told Commercial Property Executive. “Releasing these buildings would require enormous amounts of capital to bring them up to modern office space standards—making it more cost-effective to convert to industrial.”
In late 2021, Duke Realty Corp. acquired the two-story office structure at 2727 E. Imperial Highway in Brea, Calif., paying Healthcare Property Advisors approximately $35.4 million for the roughly 105,000-square-foot, Orange County asset. The leading domestic-only, pure-play logistics property REIT has no intention of straying from its core strategy; the company will commence the conversion of the Class B office building into an industrial facility soon after the current tenant’s lease expires.
Goodrich Corp. has leased space at 2727 E. Imperial, originally built in 1984, since 2012, and currently utilizes the facility to house Raytheon Technologies Corp. subsidiary Collins Aerospace. Duke has already submitted a preliminary proposal to the Brea Planning Division for the demolition of the existing structure and the development of an approximately 117,900-square-foot warehouse building.
