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Are Multistory Warehouses on South Florida’s Horizon?

May 8, 2019

A new concept may provide a solution to the need for warehouse space. But it has its own challenges

For several years now, we’ve all heard how e-commerce is changing the retail landscape. As consumers continue to click to shop, there is a greater expectation for rapid delivery. For e-retailers, that means establishing local distribution centers, most likely using vacant warehouse space or newly built facilities close to urban centers and airports.

At the moment, in locations like Miami-Dade where population is dense and available space is sparse, that formula seems to be working. But e-commerce shows no sign of slowing down and more distribution space will be needed. And the solution may involve looking upward.

Is it time for the warehouse of the past to go?

Today’s warehouse usually comes in one size: sprawling. Very often, these structures took advantage of open land on the outskirts of populated areas. They were designed to be cavernous structures, a holding place for goods stacked to the height of the high ceiling, able to manage forklift maneuvering and trailer deliveries.

In places like Miami and other densely populated urban markets, the outskirts have disappeared. This lack of buildable land has increased its value, which in turn has led to rent increases in buildings that already exist.

New tenants are shopping for space

At the same time, the tenant base has changed. In the past, most tenants would be content with 20,000 to 30,000 square feet of warehouse space but with a changing marketplace, many tenants are now seeking ten times that amount. And some experts predict there are about 10 years of available square feet remaining.

While a decade may seem like a long way off, the impact of Miami’s unique predicament is already being felt. Rising rents are encouraging potential tenants to shop for better deals, and many of these can be found north of Miami-Dade. Both Broward and Palm Beach counties tend to have lower rents and more space available, and both are close enough to Miami-Dade to still be able to provide efficient and rapid delivery.

The multistory warehouse: a potential solution with challenges

Miami is seen as a potential market for the multistory warehouse, and although it does seem to solve a problem, it also runs into a few challenges that are uniquely American. Typically, multistory warehouses are located in dense areas. As a result, their design often involves tighter turns on ramps and in aisles, as well as loading and unloading areas on each of the floors.

At first glance, this doesn’t seem like much of an issue—until one considers the size and length of the typical American tractor trailer, a mainstay of the nation’s delivery of goods. In Asian and European cities, this wasn’t too much of an issue since they already use smaller trucks that are easily maneuverable in tight city streets and on warehouse ramps.

In America, big trucks could bring urban traffic to a standstill which could delay the movement of goods, which could then eat into profits. While smaller trucks and vans could solve the issue, developers and potential tenants may see compact vehicles that transport less product as inefficient, too risky, and too expensive.

Why it’s important to consider a multistory future

Generally speaking, multistory warehouses are a new concept. As a result, initial rents would be higher, and the tenant would need to feel especially secure that the investment would be worth the return. That being said, can the Miami-Dade market afford not to look at warehousing solutions for the future? At Morris Southeast Group, we have always felt it’s important to look ahead in order to meet the CRE challenges and changes that are sure to come, from multistory warehouses to using  virtual reality to prepping for climate change. To learn more about property investment opportunities and our other services, call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

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