JLL research highlights connection between gains in e-commerce and industrial clear heights

Research recently issued by Chicago-based industrial real estate firm JLL shows a clear connection between increases in clear heights, which is commonly viewed as the amount of feet measured from the floor to bottom of a lowest hanging ceiling object, and e-commerce activity going back to the Dot Com boom early in the 21st century.

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Research recently issued by Chicago-based industrial real estate firm JLL shows a clear connection between increases in clear heights, which is commonly viewed as the amount of feet measured from the floor to bottom of a lowest hanging ceiling object, and e-commerce activity going back to the Dot Com boom early in the 21st century.

Since the Dot Com boom, JLL noted that while the annual growth of e-commerce portion of total retail sales has risen 15.6% while the average clear height of buildings delivered in 2018, at 33.6 feet, has gone up 18.1%.

The firm explained that higher clear heights add more cubic capacity that allows storing more palletized product, helping reduce occupancy cost on a per square foot basis. And it added that another benefit is the ability to utilize mezzanine space for storage, as mezzanine space is commonly used by e-commerce tenants and can potentially double or triple usable storage within the facility.

While e-commerce tenants are viewed as the pacesetter for increases in clear heights, JLL observed that other sectors are also leveraging additional vertical space as well. The firm said that in recent transactions it has seen taller warehouses being built in larger metropolitan areas where space is at a premium and commanding higher rents. 
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In an interview, Mehtab Randhawa, vice president, director of U.S.Industrial Research at JLL, cited different ways in which tenants are leveraging increases in clear heights.

“Additional storage space and future cost savings are the two key benefits to tenants,” said Randhawa. “Advancements in warehouse technology for picking from higher racks have helped tenants go vertical with their storage. On some of the new developments, we are seeing a trend of developers building 40-foot clear facilities. Big-box users typically sign longer-term leases - while the tenant might not utilize the additional space in year one, in the future this gives them the option to eventually expand racks vertically.”

From a cost perspective, Randhawa said it is usually less expensive and more efficient for a tenant to increase storage capacity vertically (cubic square feet) rather than to lease additional space horizontally, adding that to expand horizontally there is an added rent cost and need for land to expand the building. 

When asked if JLL is seeing more customers asking for increases in average clear heights for speculative development, Randhawa said that landlords for big-box developments are pushing to build in the 36-40-foot range today.

“This is an added cost from a developer’s perspective, but there is demand in the market from tenants,” she said. “The U.S. speculative pre-leasing rates on new deliveries are stable in the 25-28% range – an indicator that these taller facilities are getting leased by tenants. What used to be considered a high clear height 24-26 feet isn’t cutting it anymore and tenants are looking for spaces with 38-40 foot clear heights. From the U.S. development pipeline, we have seen an increase in our average clear height for recently delivered buildings and those under construction. Even if the tenant may not need the higher clear height today, the additional space allows the building to stay relevant in the future.”

As demand for increased clear heights continues, JLL pointed out that some industrial real estate developers are looking to push 40-foot clear heights for new buildings, with Eastern & Central Pennsylvania, Inland Empire & New Jersey being the leading markets with the highest average clear heights.

In addition to raising clear heights, other things being addressed to meet the increased need for newer and more sophisticated warehouses and distribution centers cited in September 2018 research from JLL include: wireless technology and real-time tracking; a hyper-connected facility; the new forklift; growing clear heights; picking tech, picking up speed-related technologies such as automated robots or shuttles and new picking technologies; sustainability making strides in buildings through things like solar panels, LED lighting, and cool roof systems, among other things; human-centric design placing a growing importance on workers’ quality of life through the implementation of things like proper lighting, air quality sensors, and temperature control, among others; land flexibility for things like additional truck storage or physical building expansions; and super flat to sloped flooring to achieve greater efficiencies.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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