Multistory Distribution Centers

Apr 03, 2018

BY NOW, ALL commercial real estate professionals are familiar with the growth of e-commerce and its impacts on every aspect of retail sales and logistics, from a product’s point of origin to the consumer’s doorstep. CRE professionals – and the buildings they design and develop – must respond to these quickly evolving market demands.

Technology has completely redefined every facet of retail commerce, but commercial real estate has not fully responded. To date, the primary solution has been to provide space for e-commerce and third-party logistics providers in well-located existing and new industrial/distribution centers. This approach has resulted in rising land and building values in many submarkets. It has also generated strong demand for industrial facilities in urban areas, where land is scarce and expensive, to support “last-mile” delivery. The CRE industry must develop a new building type that will keep pace with the explosive growth of e-commerce. This is not a trend, but rather the next evolution of industrial building design and development. This innovative prototype will transform and reinvent how and where some new fulfillment centers are developed.

Multistory Prototype Design

Ware Malcomb is currently designing some of the first multistory warehouse facilities in major markets throughout North America. These facilities will predominantly be located in highly urbanized population centers close to seaports handling containerized cargo arriving from overseas. Developers are actively seeking out sites with these characteristics, and have engaged Ware Malcomb to assess site feasibility and functional planning options. These are not theoretical experiments, but rather realistic plans for functional buildings rooted in the basic design principles that define successful institutional grade industrial distribution facilities. Each of these proposed buildings is located in a market with great demand for multitenant fulfillment space.

The Goal

Several challenges make it difficult for developers and designers to keep pace with demand. Designers must significantly increase the amount of rentable area to justify the high cost of land and overcome the lack of development opportunities in the most desirable, land-constrained locations. The only way to increase rentable area on these sites is to build vertically; in other words, to “build a warehouse on top of a warehouse.”

Multistory industrial buildings are more common in Asian markets such as Japan and China. Tenants in these locations have accepted this type of building configuration without sacrificing functionality. The need to go vertical in these foreign markets is a direct result of the same market pressures now being faced in North America. The notable difference is that the rapid growth of e-commerce and the need to provide an efficient, expanding last-mile delivery network have further magnified the need and urgency to develop such facilities here.

The Challenge

Multistory industrial warehouses need to be fully functional, divisible and leasable without compromising the typical tenant’s operational requirements. Designers also must mitigate any perceived loss of efficiency by prospective tenants.

The greatest challenge for the multistory warehouse, however, is to become universally accepted by capital markets as an institutional-grade building. What will be the true measure of the success for this new design approach? An increased volume of rentable area, located precisely where the consumer demand for it exists, resulting in market acceptance of rent premiums over conventional one-story structures.

 

Source: Todisco, Jay. “Industrial Development Goes Vertical.” Commercial Real Estate Development Association, 2018, www.naiop.org/en/Magazine/2017/Winter-2017-2018/Development-Ownership/Industrial-Development-Goes-Vertical#.Wqqxk5lhJbM.email.



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