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The Shift Towards Multi-Story Industrial Warehousing

NAI Global | July 11, 2018

Over the past several years, the industrial real estate industry has experienced its strongest run to date. And, thanks to the worldwide growth of both domestic and international economies, coupled with the explosion of eCommerce, this trend is predicted to continue through 2019 - and even beyond.

Sounds great, right?

But there’s one significant challenge. This particular type of space is at a premium, like never before. It’s currently more difficult than ever to find suitable industrial space to fit the needs of those clients who are looking for a distribution center or distribution centers. As the search continues, a new concept in industrial real estate is emerging in the United States - multi-story industrial warehousing. These particular types of facilities are currently popping up throughout the US in urban areas with high population density, such as Seattle and New York City, to answer consumers’ demands for fast delivery of goods.

While this concept may seem new to Americans, these types of warehouses have actually been utilized throughout Asia for some time now. By comparison, the trend in US warehousing has always been large scale distribution centers in suburban areas, where land could be purchased in large lots and at a low cost. So, what’s changed?

Two words: Amazon Prime.

With the online retailer giant’s introduction to free, guaranteed two day delivery, the eCommerce industry immediately shifted. Suddenly, nearly every other online retailer immediately felt the need to increase their own shipping speeds, just to stay competitive in the market. The only way to efficiently do that is to add more distribution centers, especially in highly populated cities and urban areas where there is little space left to begin with.

This need to maximize land and space to handle and move more product has led to developers completely rethinking what these types of facilities will look like. Today’s industrial space can include loading ramps and decks on multiple floors, higher levels accessible through smaller scale freight elevators, and even more -- with these particular buildings, the sky is (literally) the limit.

There are several examples of these types of groundbreaking warehouses in the United States already. Seattle led the state-side trend, with a three story warehouse facility. San Francisco is set to have a similar project developed, and New York City is also catching on to the trend, with numerous vertical projects being announced in different boroughs.

Of course, these US markets are not the only cities seeing warehouses. Any market where real estate is at a premium is a candidate for these types of centers. And the fact that this vertical trend is being adopted by so many markets that are so vastly and inherently different is telling. With consumer demand for faster delivery time continuing to grow, the expectation continues to shift toward an “on demand” economy model. This shift will likely have a widespread ripple effect, leading to countless multi-story vertical warehouses all across the globe, possibly even in every urban market.