Design 2147 CEO Sisto Martello recently spoke with Paul Bralower, Associate Broker at Pinnacle Realty, about distribution and warehousing facilities in New York City. Here are some of the important takeaways from the conversation.
Q. One of Pinnacle’s areas of focus is self-storage. With the trend toward smaller units in multi-family buildings, are you seeing an increase in demand for self-storage facilities?
A. In 2017, the New York City Council implemented special permitting requirements for new self-storage developments in NYC’s Industrial Business Zones. As a result, many developers now recognize that developing new facilities can be challenging due to the limited availability of viable sites.
However, we have recently observed increased activity from moving and storage companies acquiring and repurposing existing industrial buildings. This trend appears to be driven, in part, by the growing demand for storage, stemming from the smaller unit sizes in newly constructed multifamily residential buildings. Additionally, the high volume of relocations, particularly during the early 2020s, has likely contributed to increased demand for moving services and flexible storage solutions.
Q. How has the market for larger commercial warehouses and distribution centers changed over the past five years?
A. Over the past five years, for the first time in decades, there has been a notable increase in the construction of new Class A warehouse and distribution centers. Institutional investors have shown strong interest in the NYC industrial markets, actively acquiring and developing large warehouses and distribution centers. In addition, major e-commerce and logistics companies have been highly active in the market, with their strategies and space requirements continuing to evolve.
Q. What opportunities exist for converting industrial spaces into distribution or warehousing facilities?
A. The number of industrial buildings in New York City has gradually been depleted due to factors such as increased residential development and office conversions, making the remaining industrial spaces increasingly valuable. While many of these buildings were originally constructed for manufacturing, there has been a significant shift in demand, especially in recent years, toward warehouse and distribution uses.
Some of the larger industrial buildings that have not been upgraded in decades may need to adapt in the coming years as factors such as ceiling heights, loading capabilities, and parking become increasingly important. While there has been strong interest from institutional investors in larger industrial spaces, we believe there are still significant opportunities in smaller-sized buildings, as well as subdividing large industrial properties, which can help maximize marketability and achieve higher rental potential.
Q. What are the key design considerations when planning a modern distribution center, especially in terms of scalability and flexibility?
A. Electrical system capacity for EV charging, energy efficiency for heating and cooling, clear ceiling heights, column spacing, loading capabilities, truck circulation, and parking are essential. The flexibility to divide spaces to accommodate various size requirements is also important.
Q. What are the most critical operational inefficiencies you’ve seen in older warehouses, and how can they be avoided in new developments?
A. Limited loading capabilities, lower ceiling heights, and a lack of parking are some of the most frequent operational inefficiencies we see that should be avoided in new developments.
Q. From a developer’s standpoint, what emerging technologies should we be planning for in the next generation of warehousing facilities?
A. EV charging, energy efficiency, and available power capacity. In the coming years, new facilities may need to be equipped to support emerging technologies such as automation, artificial intelligence, robotics, 3D printing, and high-speed data systems.
Q. What zoning or regulatory challenges are most common when developing distribution centers?
A. One thing that comes to mind is recent requirements for a “special use permit” for new, larger distribution facilities in New York City. This could add an extra layer of uncertainty for developers who now may need approvals for things that were formerly as of right.
Q. How do sustainability goals and green building standards influence the design and construction of warehouses today?
A. Developers are increasingly incorporating EV parking, energy-efficient heating and cooling systems, and rooftop solar panels. Additionally, new compliance regulations, such as Local Law 97, require buildings to meet specific energy efficiency benchmarks.
Q. Have the growth of e-commerce and last-mile delivery changed the approach to warehouse site selection and development?
A. There is now more of an emphasis on things such as parking and vehicle circulation. The growth of e-commerce and last-mile delivery has also put warehouse/ distribution properties in high demand, particularly in heavily populated areas such as New York City.
Q. What advice would you give property owners looking to future-proof their warehousing investments in a rapidly changing logistics landscape?
A. Every building presents unique challenges and opportunities, which is why it’s crucial that property owners reach out to us to discuss their specific situation. However, higher ceiling heights, enhanced loading areas, expanded parking capabilities, and the flexibility to divide spaces consistently make properties more resilient and attractive.
