The Bright Design Ideas Guiding Industrial's Way

Continuous demand for industrial space as the rest of commercial real estate fumbles amid the coronavirus pandemic has designers, investors and owners contemplating what future warehouses and last-mile distribution centers will look like five to 10 years from now. 

Ideas circulating throughout the sector include everything from higher clear heights to more vertical build-outs that place truck ports at subterranean levels while building retail, office and multifamily above it.   

Dalfen Industrial is working on a few multi-story industrial projects, President Sean Dalfen said on Bisnow's "How Will Industrial Real Estate Evolve?" webinar. 

Dalfen said putting infill last-mile space close to consumers is a critical component of competitive industrial development, even if it means adding value to landlocked existing assets in creative ways. 

His firm recently engaged in talks with a developer and landowner about the possibility of building a three-story industrial space below ground and constructing one story of retail and multiple housing units above it. 

Languishing shopping center assets also are prime targets in the growing e-commerce last-mile space, and developers are looking at retrofitting local shopping malls to include industrial truck courts and storage.

"There is going to be a shift in these high-density markets away from the retail and gyms that used to be there to storing products there," Dalfen said. 

Powers Brown Architecture founding principal Jeffrey Brown said his firm spent years studying various U.S. malls to determine what locations could accommodate construction of industrial storage and logistics space. Brown got the idea several years back when Amazon started buying malls like mad across the country, he said. 

"As we started doing this research, we had four or five people come to us and [ask to] look at putting a spec industrial front loader or rear loader pieces in mall parking lots," Brown said. "We thought that's not good enough." 

To improve upon the concept, Powers Brown began studying malls to figure out the best strategy for creating spec industrial e-commerce spaces within older malls. 

Out of hundreds of shopping facilities studied, only a few of them could accommodate such a conversion, Brown said. But one site that is under examination is a great example of how industrial may evolve from existing retail. 

"One of the ones we are looking at is a vertical [project], so it’s going to have a truck court underneath," Brown said. "It will have two levels of a type of sorting center … and then it will have two schemes ... either office or about 270 keys of residential over it; and it will be attached to an existing mall."

Higher clear heights are another amenity capturing industrial market attention. 

"We have even seen some things in Houston, a couple of buildings where people are looking at 50, 70 and 80-foot clear buildings with tall racks and robotic picking systems," NAI Partners Senior Vice President Holden Rushing said. 

Dalfen is now building 40-foot clear heights in facilities all over the country. It's still unknown if the product type creates the right returns or whether it's truly needed by most end users, but Dalfen said demand is pushing construction on higher clear heights to continue. 

"If you want to have the best product out there, and someone is asking for it, you better [have] it whether they use it or not," Dalfen said.