Warehouse developers in the U.S. are starting to push the heights of logistics buildings past the ground floor. But compared to counterparts overseas who build warehouses as tall as some office buildings, they’re still thinking relatively small.
Now, an Australian company that owns what’s billed as the largest logistics center in the world is coming to Long Island City, where it could develop the city’s tallest warehouse.
Goodman Group, which trades on the Australian stock exchange and has a market cap of more than $46 billion, paid nearly $130 million to buy the site of the Lexus dealership on Northern Boulevard, sources familiar with the sale told The Real Deal.
The 3.2-acre site at 40-40 Northern Boulevard is unique in that it’s zoned for a floor-area ratio of 5. All of the other vertical warehouses under construction in the city are on sites with an FAR of 2, meaning Goodman has the opportunity to build what could be the tallest one in the Big Apple.
Newmark brokers Evan Layne & Brett Siegel (Newmark, LinkedIn)
“The recent surge of multistory industrial development in urban areas is attributed to users’ need to meet same-day delivery expectations of consumers,” read marketing materials from Newmark, where a team led by Brett Siegel, Evan Layne and Brian Schulz brokered the sale of the site.
Before 2017, no multistory industrial facilities were under construction or built in the city, according to the marketing brochure. It said there are now nine multi-story projects slated to add 7.3 million square feet, “representing an approximately a 10 percent increase to the current New York City industrial inventory.”
A representative from Goodman could not be immediately reached for comment. The Newmark brokers declined to comment.
Design sketches in the marketing materials show a building of nearly 700,000 square feet across five above-ground floors. Several of those floors, though, are double-height. So from the street, the building would appear to be as tall as roughly an 11-story office building.
Such vertical warehouse buildings will be an arresting sight for New Yorkers. They feature truck ramps that run up the side of a building in a corkscrew, making 18-wheeler semi-trucks look like marbles running down a metal track on one of those toys in a doctor’s office waiting room.
In Hong Kong, Goodman owns the nearly 6 million-square-foot ATL Logistics Centre at the Port of Hong Kong, which is billed as the world’s largest logistics building. It is 13 stories.
Goodman paid $450 million in 2013 to buy a 25-percent stake in the center, which was built in five stages between 1984 and 1994.
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Multi-story warehouse development has been established in Asia and some other areas for a long time, but has only recently picked up in the U.S.
In New York, developers including Andrew Chung’s Innovo Group, Dov Hertz’s DH Property Holdings and Scott Rechler’s RXR Realty are building the first generation of vertical warehouses in the five boroughs.
These projects are on the cutting edge of design and quality, but they do come with higher costs to tenants, who pay premium rents. Companies like Amazon and FedEx are the main market for these types of developments.
Strong demand is pushing up land prices in industrial areas. Goodman’s purchase of the Long Island City site works out to about $42 million per acre, which is believed to be a record price for an industrial development site.