Builders Debate Merits of Raising Ceilings for Warehouses

Builders Debate Merits of Raising Ceilings for Warehouses

WASHINGTON, D.C. – June 11, 2015 – (RealEstateRama) — Wall Street Journal article captured what industrial CEOs think about rising ceiling heights in industrial buildings. The CEOs were part of a “View from the Top” session at I.CON ’15 in Long Beach, California.

The executives from Prologis Inc., DCT Industrial Trust Inc., Panattoni Development Co. and The McShane Companies debated the merits of 36-foot and 40-foot clearance.

The article, in part, reads:

Jim McShane, chief executive of The McShane Companies in Chicago, said many companies are building to 36-foot clearance, but only about 13% to 15% of the tenants are using the entire space. “The market wants a 36-foot clear building but the users don’t seem to be using it,” he said.

Jeffrey Phelan, president of DCT Industrial, said higher ceilings are “the future,” but that future might not have arrived just yet. In 36-foot buildings, for example, the column spacing is several feet wider than in 32-foot buildings, and some tenants compensate by making their aisles wider. “It’s a tremendous hit upon your rent because they can’t use the space,” Mr. Phelan said. “There’s probably anywhere from 10% to 15% inefficiency in that building.”

Proponents say aiming for such great heights can attract prime clients such as Wal-Mart Stores Inc.’s Walmart.com or Amazon.com Inc., who need the extra space as the booming e-commerce sector continues to grow. Prologis is currently constructing—on spec—a one-million-square-foot warehouse in Tracy, Calif., that will have 40-foot-high ceilings, which is 25% taller than the typical 32 feet.

Read the full article in The Wall Street Journal (login may be required).

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About NAIOP: NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial, retail and mixed-use real estate. NAIOP comprises 15,000 members in North America. NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visit www.naiop.org.

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