Is 40-Foot Clearance The New Industrial Standard?

It is no surprise that industrial clear heights are rising. A new report from JLL shows that 36-foot clear heights are the current standard for new construction industrial properties—but in some places the clear heights are growing to 40 feet. These ultra-high clear heights may be preferred, however, they certainly aren’t necessary. With historically low vacancy rates throughout Southern California, it is clear that industrial users are absorbing everything in the market, new and old alike. We sat down with Louis Tomaselli, senior managing director at JLL, to talk about the rising clear heights and what they mean for the market.

GlobeSt.com: What is the standard clear-height today for new construction?

Louis Tomaselli: 36-foot clear height is really the minimum for new construction in Southern California. That is the new standard, but some people are saying that it is over 40 feet. Although any one building new today would build 36-foot clear heights, the hundreds of millions of square feet that have lower clear heights are still valuable because of their location.

GlobeSt.com: Are you seeing clear-heights go up to 40-feet?

Tomaselli: In the some of the locations across the country that are true ecommerce, they are going to 40-foot clear heights because they are putting mezzanines in. You are able to go three levels of mezzanine inside of a building, and you can take a 1 million-square-foot building and make it 3 million square feet. Most of the time, however, you don’t want to go higher than 36 feet because it gets so expensive to go higher. Additionally, all of the se buildings have sprinkler systems and at some point, you get so high, if you had a fire, the water would never reach the bottom. If you go too high, you have to put in in-rack sprinklers, which is extremely expensive. No one really wants to do that. The only reason that you would go higher than 36-foot clear is because you are a true ecommerce user that has a focused building type. For those users, we have even seen it go higher than 40 feet.

GlobeSt.com: What is happening to the older product that is well below 36-foot clear heights?

Tomaselli: Because new product has 36-foot clear height, it seems like that is what everyone wants, and that must mean that the other product—which makes up 80% of the entire Orange County market—must not be desirable. Clearly that isn’t true because we have a vacancy of 1%, so everything is leasing. There are two different uses. There are the uses that have to here because it is serving the 20 million people in Southern California. Then, there is the space that needs to be optimized so that it can be used as a true distribution center. That is really where the bifurcation of the market comes in because the clear height is about the use and the location. So, 18-foot clear heights close to Downtown Los Angeles is going to get just as high of a rate as 36-foot clear heights in the same location.

If you have 20 million people in Southern California and they all want something in an hour or same day, the box has to be close. So, the user is going to choose the box that is closest to the people that want it. If you are looking to pull product off of the port and you need 1 million square feet that is going to service Southern California as well as markets to the east, the you will probably go out to the Inland Empire and you’ll try to get the highest clear.

GlobeSt.com: We have understood these clear heights have grown as the result of the ecommerce phenomenon, but this research shows that clear heights have been steadily increasing for years. Why?

Tomaselli: In the last 20 years, we have seen the evolution of better and strong sortation and racking equipment. It used to be that the picking equipment couldn’t go that high, so how do you get a palette out of a rack that is 28-feet high? The continuation of the technology in racks has kept getting better and has allowed for smaller aisles and higher clear heights.

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