The slow climb of multistory warehouses
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Earlier this month, real estate services firm JLL Inc. published a report marking the fifth anniversary of the country’s first multistory logistics warehouse, a Prologis Inc. facility in the Georgetown Crossroads section of south Seattle. The report was titled “Multi-Story Warehouses and Their Towering Future.”
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Clever wordsmithing aside, there is an open question today, as there was then, as to how much traction the multistory model will gain. New York City, with its dense urban population, a geography bordered by bodies of water that inherently block land expansion and extremely high real estate values, is the most active market for vertical construction. According to the JLL (NYSE: JLL) report, there are five multistory warehouses standing in New York City, with five more under construction.
Besides the Seattle complex, which is a 590,000-square-foot facility currently fully occupied by a large, unidentified retailer, Prologis (NYSE: PLD) owns and operates a multistory building in Miami.
The next step in the evolution will be in Chicago, a teeming metropolis bordered by one of the Great Lakes and thus land constrained to the north. The two-story facility, located on West Division Street in the city’s downtown, will boast 1.2 million square feet when it is completed sometime in 2024.
The JLL report, while acknowledging the multistory facility trend is still in its infancy, said the segment’s potential remains strong. The macro-factors appear to be in place. The U.S. population continues to grow. More Americans are filling the nation’s urban centers. E-commerce demand relentlessly marches on, pushing businesses to adopt more hyperlocal delivery solutions to rush orders to customers.
Markets like Atlanta, Houston and Dallas/Fort Worth, none of which are particularly land constrained, are candidates for multistory facilities, according to the report, which said other fertile markets include Miami and Seattle.
The multistory concept has been in place for decades in Asia and Europe, continents with countries that have relatively scarce available land. The American model calls for higher clearances than in Asia and Europe in order to handle bigger trucks. U.S. multistory buildings will likely be capped at two to three floors, unlike in Asia, where one facility, in Hong Kong, has 22 floors.
A difference between multistory and traditional mezzanine buildings is that each floor in a multistory facility has loading dock capabilities. Two-story multistory facilities can also do double duty for businesses looking to use one floor for fulfillment and another for distribution.