Empty warehouse showroom city skyline in background

Warehouses in Tight Urban Spaces

Surging demand for same-day delivery of goods purchased online from companies such as Amazon has led many developers to consider adding multistory warehouses with multilevel truck courts to their portfolios. NAIOP noted this emerging trend in the winter 2017 issue of Development magazine in a cover story titled “Industrial Development Goes Vertical” by Jay Todisco of Ware Malcomb.

Todisco says his company helped design prototypes of some of the first multistory warehouse facilities in major markets throughout North America. He says these facilities, which are more common in dense Asian markets in China and Japan, are designed to serve highly urbanized populations near seaports. These areas are seeing big demand for multitenant fulfillment space. They’re also locations where demand for an efficient last-mile delivery network for e-commerce companies has soared in recent years.

However, because land is expensive in these urban coastal markets, “the only way to increase rentable area on these sites is to build vertically,” according to the article. In other words, developers must build “a warehouse on top of a warehouse.”

While interest in these products is strong, the challenge for multistory warehousing is “to become universally accepted by capital markets as an institutional-grade building,” Todisco wrote at the time.

Nearly a year later, acceptance might not be universal, but it appears to be growing across the country.

Since late 2017, several multistory warehouse projects have launched across North America, demonstrating that demand is rising in the commercial real estate industry for this relatively new type of building.

NAIOP’s CRE.Insights: The Last Mile conference, which was held in Seattle in March, highlighted two innovative multistory warehouse projects in Seattle: Panattoni Development’s Des Moines Creek Business Park and Prologis’ Georgetown Crossroads. Richard Kolpa, senior vice president, market officer with Prologis and Wilma Warshak, SIOR, managing partner, Washington Real Estate Advisors, LLC, gave a presentation on these developments and what they mean for the industry.

“The main reason you do this is e-commerce,” Kolpa said. “I don’t think there’s any discussion. It’s a secular change in how we do retail. It’s a huge growth market. We want to provide functional distribution space in a very dense urban market like South Seattle.”

It’s important to note that there are major differences between a multistory warehouse building with a multilevel truck court (such as Georgetown Crossroads) and a multistory warehouse/distribution facility with a ground-level truck court (such as the new “Project Rocket” development going up in Atlanta). For example, the large circular ramps required by the former need a lot of land for maneuverability, add significant cost and reduce the structure’s net rentable area, according to Todisco’s article.

But regardless of the type of multilevel warehouse developers choose to build, it’s clear that these structures will continue to grow in importance in a world that’s increasingly dependent on e-commerce.

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