With global e-commerce retail sales expected to hit $4.9 trillion by 2021, and with consumers expecting shorter delivery windows than ever before (same-day delivery in many cases), multistory warehouses could wind up being the future of warehousing in the United States. In fact, Prologis is already planning and implementing multistory warehouses in our industrial real estate portfolio.   

Although multilevel warehouses are common in densely populated areas of Asia, they are only now gaining popularity in the United States. This is partly because property developers are challenged with providing industrial real estate in some of the biggest consumer markets in the country. Developers have to deal simultaneously with chronic land shortages and city building restrictions put in place to help ease traffic congestion in the country’s larger cities.

Pros and Cons of Multilevel Warehousing

Multilevel warehousing solves several problems related to land scarcity and high property prices to give developers and property owners the ability to maximize profit potential. This type of warehouse is ideal in larger cities where land is at a premium and consumers expect same- or next-day delivery with online purchases.

A multilevel warehouse is also good for marketing purposes because a taller building is more visible among dozens of other structures. In this regard, the building itself stands as a giant platform for signs.

One of the biggest disadvantages of a multistory warehouse, however, is that it can be more expensive to build than a standard warehouse. Under new building codes, if a structure is more than three stories in height it is typically required to have a one-hour fire rating, meaning the structure will resist exposure to fire for one hour.

Because of this regulation, owners and developers either have to frame the structural support with heavy steel and fireproof the facility or build the structure from concrete. Each of these scenarios adds significant cost to the overall construction budget.

Another expense with multistory structures is that every square foot is not leasable. Elevators, equipment rooms, stair towers, etc. require dedicated space. At most, about 75 percent of the total floor area is rentable.