As Warehouse Inventory Stacks Up, Developers Look to Raise the Roof

As Warehouse Inventory Stacks Up, Developers Look to Raise the Roof

Strong online purchasing trends throughout the region over the last eight years made it necessary for large e-commerce related users to store a significant amount of product. E-commerce not only changed how consumers shop, but also how developers build new warehouse facilities. The shift to larger warehouse dimensions with taller clear heights resulted in an increase in capacity potential. Supply chain complexities also created the need for extra space to accommodate multiple processes in one facility. Figure 1 demonstrates the impact of higher clear heights on potential capacity gains for warehouse users.        

The rise of e-commerce led to the development of taller warehouse facilities to accommodate more goods stocked there rather than retail stores. Developers pushed the limits of clear heights to meet the need for more space, which bolstered strong rental growth in the second half of the current cycle and offset the increased construction costs from these enhanced facilities.

Figure 2: Net Absorption & Completions by Clear Height 2011 to Q1 2018

The popularity of taller clear heights resulted in a significant shift in occupancy gains and construction completions in the second half of the current cycle. The difference in the new product is that developers built up rather than out, providing greater vertical capacity, but building beyond the 42-foot clear height is unlikely at this point. Developers would need to consider multi-storied warehouses and currently the cost outweighs the potential benefits.
 

Spotify Will Open Regional Headquarters in the Arts District

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WC+A Moving to Row DTLA

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