Don’t Discount The Older Warehouse

Many tenants today view large, pre-2000 warehouses—those over 100,000 square feet—as outdated. This sentiment, combined with a post-pandemic shift toward newer, higher-quality facilities, has left many of these older properties sitting vacant.

However, a recent report by CBRE suggests these legacy warehouses could find new life with the right investments in retrofits and upgrades.

What’s The Scale Of The Opportunity?

Nationwide, there are approximately 3 billion square feet of older warehouse space, currently experiencing an 8% vacancy rate. These properties also show negative net absorption of 133 million square feet, indicating that more space is being vacated than leased.

How Can These Properties Be Revitalized?

According to CBRE, a number of structural and system upgrades can modernize these facilities and make them more appealing to today’s tenants:

• Curb Appeal: A refreshed exterior—new paint, updated façade elements, and improved landscaping—can greatly enhance first impressions.
• Clear Heights: Raising the roof to meet the modern standard of 30-foot clear heights, though capital-intensive, can be achieved using hydraulic post-shores or telescoping columns and is a major value-add.
• Fire Safety: Installing Early Suppression Fast Response (ESFR) sprinkler systems offers superior fire protection compared to older in-rack systems, easing tenant concerns.
• Electrical Capacity: Upgrading wiring and electrical panels can better accommodate the increased power demands of modern operations.
• Climate Control: HVAC systems account for a significant portion of energy use (14% for cooling and 18% for ventilation). Installing smart sensors that monitor temperature, humidity, and occupancy can optimize energy usage by automatically adjusting system settings.
• Windows: As much as 40% of a building’s energy loss can come through windows. Replacing them with high-efficiency, insulated models featuring shading can reduce energy consumption and operating costs.
• Solar Power: Solar panel installations can distinguish an older building from newer options—especially since fewer than 2% of industrial properties have them. In fact, over half of Energy Star-certified industrial buildings report that solar provides more than 50% of their total energy needs.

Looking Ahead

The CBRE report notes that high construction costs, labor shortages, and tariffs make new development more difficult. At the same time, 325 million square feet of older warehouse space is set to come off lease in the next three years.

“There will be a growing need to deploy capital for modernizing these facilities,” CBE concludes.

Source: ConnectCRE