Why Some Cities Are Likely To See Taller Warehouse Projects — And The Role Amazon Is Playing

After proliferating largely in other parts of the world, multistory warehouses are beginning to rise in the United States.

Nationally, there were 62.8 million square feet of warehouses with three or more stories in the U.S., as of August, with another 11.9 million square feet underway and 23 million in planning stages, according to Colliers International Inc. research.

Notably, 74% of that pipeline and existing inventory is occupied by Amazon.com Inc., the dominant player in industrial real estate, despite its pullback since the height of the Covid-19 pandemic.

JLL recently examined multistory warehouses in the U.S., as the nation is in its fifth year of building multilevel logistics facilities. The first U.S. multistory warehouse opened in 2018 in Seattle.

Today, notable multistory warehouse projects include several in New York, where urban-logistics projects under construction and in planning would add 9.4 million square feet of additional last-mile logistics space, according to JLL. Those include the 385,510-square-foot Red Hook Logistics Center in Brooklyn and the Borden Complex, which totals 680,000 square feet, in Long Island City.

Most of the urban multistory warehouse tenant demand is coming from groups needing last-mile delivery space, although, she said, there’s also a lot of interest from food-and-beverage groups in occupying that kind of space. Still, while the multistory warehouse trend has gained traction in the five years it’s been in the United States, it’s not likely to become a mainstream part of the industrial market because of the expense to build them as well as costlier infrastructure.

There are also zoning constraints to getting a multistory warehouse project approved, not unlike more traditional single-story industrial facilities. Another hurdle is the standard truck size in the United States, where 40-foot trucks are common, compared to 25-foot trucks in other parts of the world, according to Colliers. Smaller trucks make navigating a more compact warehouse footprint easier.

As Colliers noted in its report, many markets seeing multistory warehouse construction are also ones that’ve been able to push rents significantly higher in recent years, which could help offset the additional cost of building taller, more complex facilities.

Source: SFBJ