Over the last 60 years, industrial buildings in California’s Orange County have grown nearly 50 percent taller, to an average clear height of 31.4 feet, according to a new study by JLL.
Meanwhile, industrial vacancy continues to drop to new historic lows, now around 2.4 percent, according to CoStar data. Land in the built-out Orange County market in particular is becoming scarce.
“We have no choice but to go up,” said Zach Niles, managing director of industrial real estate in JLL’s Irvine, CA office.
When industrial buildings were being developed in the 1960s, space needs were smaller and building technologies were limited. Buildings tended to be longer and only averaged about 21 feet in clear heights, the report said.
As the years moved on, the market moved from being manufacturing-focused, largely led by aerospace companies, to more warehouse-focused, which required more storage. The ability to build higher, and to reach those heights with newer technologies and tools such as skylifts, grew with it.
Today’s space demands, led largely by the growing e-commerce industry, are compelling developers to build even taller.
“Industrial has experienced a true paradigm shift in the past four-to-five years,” Niles said. “It’s e-commerce as consumers move toward online retail, which will continue to happen even through a recession.”
Instead of sitting on shelves in stores, those goods are all stocked in warehouses in industrial markets awaiting a quick two-day hipping trip to someone’s front door. With no space left to build out sideways, they’re building taller.
The trend is happening everywhere, said Davis, not just in Orange County.
In some cases, developers are experimenting with creating multi-story industrial buildings. Logistics developer ProLogis Inc. is underway on a three-story industrial building in Seattle, and two different development groups are planning similar multi-story buildings in the New York City metro.
Multi-story building hasn’t happened yet in Southern California’s industrial market, but there’s every indication that developers continue to build taller single-story ones here. Niles expects buildings that are about 20 feet tall will get torn down and rebuilt even taller to meet the growing demands of the industrial market, even as many observers suspect the market is toward the end of its growth cycle.
“It would be foolish not to agree there will be a recession,” he said. “I think industrial will be the darling that rides through that.”