11 October, 2018

Developers Testing Multistory Warehouses in Select Markets

U.S. industrial real estate demand has outpaced supply for 32 consecutive quarters, largely the result of rapid e-commerce growth. With consumers expecting faster delivery times, there’s a looming shortage of urban infill sites for new “last-mile” delivery and a budding trend of multistory warehouse development. The average land price for single-story warehouse development in the U.S. has doubled in the past five years to $30 per buildable sq. ft.  Multistory warehouses are more common in densely populated Asian and European markets where, land prices are at least two to three times higher than in the U.S.

The key variables for multistory warehouse development are high population density, strong e-commerce penetration and tight market conditions for suitable last-mile fulfillment buildings and development sites. While efficiently accommodating the 53-foot trucks commonly used in U.S. logistics is a challenge (much smaller trucks are used in Asia and Europe),  at least five multistory warehouses are underway or in the pipeline in New York City, Seattle and San Francisco. If successful, these new projects could set an example for developers in other cities that face similar conditions.

 


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View an analysis of multi-story development economics in Texas.


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