Multi-storey warehouses emerging

Multi-storey warehouses emerging

12 January 2018

Multi-storey warehouses have begun to emerge in city fringe locations across Australia, states a new report from Colliers International.

“Although it’s early days for multi-storey warehouses around Australia, the concept of multi-storey warehouses is not new,” says Khalid Hourani, Colliers International Director of Project Management.

“These facilities are utilised around the world, particularly throughout Asia where major cities are very dense and land values are extremely high.”

“However, they have only recently become a financially viable option due to changes in market conditions and the ‘need it now’ expectations of millennials,” he says.

These changes include increasing land prices, the declining availability of industrial space, and the continual rise of eCommerce.

As the name suggests, multi-storey warehouses have two or more floors of usable storage area. The higher floors are accessed by ramps or large lifts.

Early 2017, U.S. logistics company, Prologis, broke ground on a three-story, 54,777 square metre multi-storey fulfilment centre in South Seattle. The facility includes ramps for truck access to second-floor loading docks. A freight elevator links the third floor to ground floor loading docks.

Although the Proligis building is the first of its kind in the U.S., multi-story industrial buildings are common in Asia and Europe where vacant land is harder to find, notes the Wall Street Journal.

“Major urban areas are running out of industrial space,” said Hamid Moghadam, chief executive of Prologis. “The only way the logistics sector can compete is with this more dense format.”

CBRE reports that multi-storey warehouses in Asia have 2 to 17 floors of storage space.

Multi-storey warehouses in urban centres don’t come cheap. Some analysts estimate that rental rates for multi-storey facilities could be up to 50 per cent higher than standard warehouse rates.

But those rates could make sense for many retailers who will be saving money on delivery costs by locating closer to customers.

“Last mile” fulfilment centres could especially benefit from the multi-storey warehouse format, since they move smaller volumes or freight to many more closer locations.

According to Colliers International’s Spotlight on South Sydney research series, smaller multi-storey warehouses (often co-located warehouse and ancillary office buildings) are coming online in the South Sydney sub-market.

These buildings potentially offer occupiers lower operating costs, time and delivery cost savings due to closer proximity to target markets, and more sustainable and environmentally friendly facilities.

On the other hand, they typically require a higher upfront capital cost, above average power use, more forward planning, and possible upgrades to technology and operating systems.

Nevertheless, multi-storey warehouses are a strong and viable option for organisations that need quick distribution to highly populated areas.

“Organisations whose operations and products are suitable for smaller, condensed facilities and could co-locate their office and warehouse functions in one facility would be ideal users,” says Mr Hourani.