Will Multistory Warehouses Catch On? In NYC And A Handful Of Markets, Maybe.

Rising over 150 feet above the Gowanus Canal in Brooklyn, the Sunset Industrial Park is set to become the largest multistory warehouse in the nation when construction is completed in early 2021. Tractor-trailers will weave their way up, around and through the structure, exchanging goods to be delivered to the more than 8 million people that make their homes in New York City.

While the warehouse has been hailed as a landmark feat in terms of both scale and industrial design, it is unclear whether Sunset Industrial Park is a harbinger of more multistory projects to come in the U.S., or a one-off project only suited for the nation’s largest and most demanding industrial market.

“The U.S. is definitely in the infancy of multistory,” said JLL Managing Director Leslie Lanne, who leads the brokerage team for Sunset Industrial Park. “New York City [is] the trailblazer. But there’s only a handful of other markets that can support this kind of construction.”

Brooklyn and Queens are each home to more than 2.3 million people — if the boroughs were independent, they would be the fourth- and fifth-largest cities in the U.S. Delivery demand is immense, but traffic congestion makes same-day delivery a difficult proposition. Combined with a general lack of available land, the geographic barriers present a uniquely challenging market for industrial distribution. 

Those challenges make it all the more amazing, then, that Bridge Development Partners and DH Property Holdings were able to find 18 acres of developable land just 2 miles south of the most densely populated neighborhoods of Brooklyn. With 1.3M SF of industrial space planned for the warehouse, the pure scale of Sunset Industrial Park sets it apart from New York’s industrial stock.

The design of the warehouse is one-of-a-kind in the U.S., Lanne said. It features clear heights of 32 feet on the first two floors and 24 feet on the upper two floors, as well as different entrances and exits for trucks, vans and cars. Lanne added that the whole facility is cross-docked, a scheme that keeps goods flowing across the four warehouse floors.

“It’s totally unique,” Lanne said. “Sunset Industrial Park has been able to be designed without many compromises, thanks to how much land we have.”

The innovative design could become a blueprint for multistory warehouses in other American cities. The Sunset Industrial Park represents a kind of catch-up to Asian markets, where multistory warehouses have been used for years.

But even with demand for industrial space at an all-time high, most U.S. markets may not ever have multistory warehouses, just because they don’t actually need them.

“With the exception of a few markets, we’re not strapped for land in and around our cities the way a place like Shanghai or Tokyo is,” Lanne said. “There has to be a perfect storm of traffic congestion, population and lack of available land.” 

In addition to New York, Lanne mentioned the Bay Area, central Los Angeles and inside Washington, D.C.’s Beltway as some of the few areas where multistory industrial development probably makes sense.

Even in New York, where demand is astronomical, it may be tough to replicate Sunset Industrial Park. Though they are expected to be able to achieve premium rents, multistory warehouses in NYC are extremely pricey to build and develop. 

Rezoning has also eaten into the sites that might have been able to support industrial assets. As formerly industrial neighborhoods like Gowanus and Industry City have been opened to a mix of uses including office, retail or multifamily, developers have been hard-pressed to find sites to support new warehouses.

“There’s always a competition for land between industrial, residential and mixed-use office, and many times industrial is not the winner,” Lanne said.

Surprisingly, height itself is not really a constraint. If the location is right, there are not really diminishing returns on each successive floor, Lanne said, pointing to a 22-story warehouse in Hong Kong.

Lanne did not cite any properties in particular, but said that NYC is primed for more multistory warehouses. Though the media has focused on how e-commerce is creating a boom in industrial demand, she said, it is hard to fathom how much industrial space NYC needs to survive outside of goods ordered online. 

“There’s manufacturers, food and beverage distributors and an immense number of service providers,” Lanne said. “New York has a tenant base that’s very tied to the area that it serves.”

Lanne will take part in a panel on multistory development at NAIOP’s I.CON East Industrial Conference in Jersey City, Sept. 12-13. 

This feature was produced in collaboration between Bisnow Branded Content and NAIOP. Bisnow news staff was not involved in the production of this content.