Why (And Where) Multi-Level Warehouses Will Dominate in 2022 By Lynn Pollack
The industrial and logistics asset class has been on a record tear as of late, driven in part by COVID-era shutdowns of physical retail and a boom in e-commerce spending. And that’s forced developers to get creative in how they curate logistics and warehouse space that caters to changing occupier needs.
On one end of the spectrum, there are multi-level warehouses, which have finally made their way to North American markets, says Jeff Miller, Vice President, Industrial, Oxford Properties Group.
“We’re seeing a lack of available land in dense markets, the price of land has really accelerated,” Miller told Avison Young’s Mariam Sobh on a recent podcast. “And lease rates have followed suit. So finally, you know, it justifies building these in select markets.”
Oxford Properties is on track to deliver Canada’s first large-scale multilevel, a 700,000+ square foot two-story warehouse called Riverbend Business Park, in Vancouver, British Columbia.
Miller says “it’s actually really refreshing, you know, to see the development community get more creative for industrial development.”
“We should give credit to the industry for getting a little bit more creative,” he says. “I think densifying these industrial developments is a good thing, versus your typical, you know, greenfield site. It’s a more efficient use of land, and quite frankly, better for the environment.”
Miller predicts the pace of multi-story will “definitely” pick up in large, dense and expensive markets. Several are already underway in Vancouver, Seattle, and the boroughs of New York. The common denominators? They’re all in places with “virtually have no land available,” with “really, really high barriers to entry.” And typically, big e-commerce or retail big box players are experimenting with the property type— though Miller predicts multi-story development will be driven by more the geography and the barriers to entry than a particular tenant.
“The likely driver will be the price of land, and also the ability to achieve the rental rates that justify the extra cost of going vertical,” Miller predicts.
On the other end of the spectrum, there are micro-fulfillment centers, which Miller says are gaining momentum.
“They are permanent, for the most part,” he says. They are smaller in footprint and format. And really what they are intended to serve is high volume and being close to the population on quick delivery. So for instance, some very large retailers that may have a 100,000 square-foot retail store are actually implementing these micro fulfillment centers in the back of a traditional retail store to kind of turn through their high volume goods.”