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Commercial Real Estate

To Keep Up With E-Commerce, Warehouses Need A Makeover

DFW’s industrial buildings are newer than the U.S. average, but they’re still behind in adapting to the age of online shopping.

Even though warehouses in Dallas-Fort Worth are three years younger than the national average, they’re still too old to contain all the infrastructure necessary for serving a growing population of online shoppers, according to a recent study by CBRE.

Among the 56 major U.S. markets CBRE analyzed, the average age of industrial buildings is 34 years old. Younger, southwestern cities, such as Dallas, tend to host newer warehouses. Industrial spaces older than 10 or 15 years may not be ready to meet today’s market, according to the report. Warehouses will need a new look to adapt to the demands of e-commerce, which developers should keep in mind as they build new spaces, says Steve Berger, CBRE senior vice president with industrial and logistics in Dallas. About 75 percent of the industrial space leased in 2016 and 2017 was in buildings less than five years old.

“What differentiates these is that buildings are taller to accommodate mezzanines, and there’s automation with conveyor systems. And all of that demands greater electrical capacity,” he says. “Because of the higher employee count, now you may have [air] conditioned space rather than hot, warehouse space. That means the building is insulated and has greater electrical capacity and costs more … Because you’re moving more trucks in and out on a faster basis, you have larger truck courts, you have demand for trailer parking onsite.”

Many developers in North Texas will need these updates to keep up with an industry so successful—and concentrated—in the region. CBRE Research Analyst Miller Hamrick, says Dallas’ industrial market is one of the best in the U.S. “We’re probably one of five super-regional distribution markets in the country,” he says. “If you look at places like Atlanta and Dallas, our growth is so much at a higher velocity than at other places.”

Younger markets such as Atlanta and Las Vegas are located mostly in the West and South, while the Northeast holds older markets, with average warehouse ages in the 50s and 40s. But warehouses everywhere are growing old: The national average building age has aged eight years in the past decade, and keeping it from heightening would require almost triple annual construction.

In the past ten years, construction of warehouses and distribution centers has averaged 100 million square feet annually, but maintaining the average age would demand 275 million square feet to be built each year. With a peak of 183 million square feet last year, the construction rate still falls short, the study found. Despite its rapid expansion, Berger says the construction in Dallas isn’t just a push for more real estate. It’s a demand for modern spaces.

“While we are growing and demanding more space, there’s more to the story than just needing more,” he says. “It’s also the demand for different, improved space to service the demands of today’s distribution facilities.”

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