What can developers do when companies need warehouse space in tight urban locations? Why not build up?
In a recent report, JLL predicts that the United States will soon join countries such as Asia and India in “building up instead of out” to add more logistics space to crowded cities such as Chicago, New York and Miami.
And in news that’s important for the entirety of the Midwest, these multistory warehouses, which fall into the growing urban logistics space, might soon be popping up in smaller but still major cities across the country.
The reasons for this are clear: Ecommerce continues to grow. Customers are comfortable ordering everything from electronics and apparel to shoes, toys, fitness equipment and groceries online. And these same customers want their products delivered to them quickly.
Because of this, companies need warehouse space that is located close to these customers. That frequently means opening warehouses in urban environments, where space is limited. Companies are increasingly turning to vertical construction to squeeze more warehouse space into smaller urban areas.
JLL’s latest urban logistics report, released Oct. 11, looks at both the history of multistory warehousing and its future. Not surprisingly, multistory warehouses are most common in Asia, where space in urban centers is limited. JLL says that multistory warehouses have existed in Asia for at least two decades.
The tallest multistory warehouses are located in Hong Kong, where warehouses can stretch up to 22 stories. Those are outliers, but, as JLL reports, it’s not unusual see multistory warehouses in China, Singapore and Japan that stand at least five stories.
The main ingredient that sets these high-rise warehouse facilities apart is that there are loading docks on more than one level.
An example of the this trend in the Midwest? Construction crews have broke ground on 1237 W. Division in Chicago. Once complete next year, this warehouse will include 1.2 million square feet spread across two stories. The complex will include both rooftop parking and a five-story parking garage.
The center will include parking for 1,600 vehicles and offer 36-foot clear heights. JLL says that the facility will be located with a five-mile radius of a potential $2 billion in ecommerce sales.
Plenty of positives
Why does JLL predict that these taller warehouse spaces will become more common throughout the United States?
They feature what JLL calls “agile architecture.” By building vertically, developers can maximize even smaller urban sites. Developers can also choose on which floors to have loading docks and whether to use buildings’ rooftops for parking or as an office space. Developers can get creative when they build up instead of out.
Then there is parking. By building vertically, developers can more easily add needed parking spaces to their warehouse facilities. JLL says that this is important even in urban areas. Yes, big cities such as Chicago have public transportation. But even vertical warehouses will tend to cluster in the far corners of metropolitan areas, creating the need for workers to commute to the sites.
By placing parking on a top floor, developers can ensure that building employees have a place to stow their car even if the site on which the warehouse sits offers limited acres.
Delivery vehicles are changing, too. While most deliveries are still made with large delivery trucks, deliveries from urban logistics buildings also rely on smaller, more nimble vehicles such as electric bicycles and scooters. These smaller vehicles can travel down routes that are more challenging for larger cars or trucks to maneuver.
Multistory warehouses that rely on a range of delivery vehicle types, then, might become the norm in crowded urban areas.
But there are hurdles, too
This doesn’t mean that developers won’t face challenges when trying to add multistory urban warehouses to big cities.
Zoning laws are often outdated when it comes to warehouse space and major cities. Residents might not want warehouses in their neighborhoods, whether these spaces are vertical or horizontal. As JLL says, consumers want their packages delivered on the same day that they order them, but they don’t want the buildings that house their deliveries in their backyards.
Then there’s the question of land availability and prices. Even though developers don’t need as much land when building vertically, they still need to find sites appropriate for warehouse development. That can be challenging in urban areas. The availability for land for industrial assets continues to shrink across the United States.
Multistory warehouses also face competition from other commercial property types. As JLL reports, developers might propose building hotels, multifamily sites and retail assets for the same land that other developers have targeted for multistory warehouses. Neighbors might prefer a new Target or apartment building over a warehouse.
