Industrial N Illinois

There’s no stopping the ever-growing warehouse

There’s no stopping the ever-growing warehouse,ph1
Heartland Corporate Center in Shorewood, Illinois.

If Gulliver were to travel through modern America’s real estate landscape, he might note the Lilliputian market share of the retail sector—and the corresponding Brobdingnagian nature of warehouse and logistic facilities. And it’s not just market share as industrial buildings themselves grow in size every year.

The shift to e-commerce is of course the main source for this development, as more people eschew brick-and-mortar stores and prefer to shop online—sending goods through various warehouses along the way. However, it’s not only consumers driving up the need for more—and larger—warehouse space; business-to-consumer is part of the equation, but business-to-business also plays into the robustness of our distribution channels.

“The reason you’re seeing these buildings get larger is because of tenant demand and investment activity,” said Tim Thompson, SIOR, executive vice president and managing director of industrial brokerage at HSA Commercial Real Estate. “The developers are feeding a need.”

As a cost-saving measure, many warehouse operators are choosing to perform some type of consolidation, such as bringing in different product lines for a particular client under one room. The cheapest and most efficient way to do this is to operate one larger facility rather than several smaller buildings. With more users looking to take on larger contiguous spaces, developers are happy to supply the building stock with sizable options.

Even if a new market disruption as seismic as the rise of e-commerce were to occur, it’s unlikely that the trend for ever-growing warehouses would regress. If tenants decide to take less space, the owners could always find a new user to take the available space, assuming that the building was designed with good flexibility in mind.

“I think there comes a point where buildings get too big,” Thompson said, “but I don’t think you’re going to see reverting back to smaller buildings any time in the near future.

Last August, HSA and New York-based Clarion Partners broke ground on a state-of-the-art, 757,880-square-foot warehouse building in Shorewood, Illinois. Meridian Design Build is the general contractor for the development, and David Bercu and Matthew Stauber of Colliers International are responsible for project leasing.

The building, which is scheduled for completion in late June/early July is located on a 46-acre site near the I-55 and I-80 interchange. Notwithstanding the recent and unprecedented development in the I-55 Corridor for spec industrial properties like this one, absorption and demand are still strong.

“We view this more as a I-55 play than an I-80 play, just because of what’s going on in I-55. You get up into the Bolingbrook/Romeoville area, there are very scarce land sites available for development,” said Thompson. “It’s hard to find a site that can support a building of this size.”

The new distribution center, dubbed Heartland Corporate Center, will feature 36-foot clear heights, 108 truck docks and 240 parking spaces for employees and visitors. According to Thompson, nearly all of the inquiries that HSA has had on the property have been for the whole building—or a large enough portion of the building where they would take the whole space.

“Some of this relates to scale. I’ve been in the business for quite a while, and the changes that have come have been staggering,” Thompson said. “When I started, 18-foot clear was big; then it went to 24-, 28-, 30- and then to 36-foot. Now we are seeing some 40-foot clear.”

“It’s the same with size,” Thompson continued. “It used to be that 100,000 square feet was a big building, then it went up to 300,000 then 500,000. Our 750,000-square-foot building is kind of on the small end in certain parts of the country, though in Chicago it’s a larger building.”

As Jonathan Swift wrote in Gulliver’s Travels, “Undoubtedly, philosophers are in the right when they tell us that nothing is great or little otherwise than by comparison.” Looking out at the horizon, it would seem that the trend for larger industrial buildings will carry on for quite some time.