What’s more, the power requirements of warehouses have doubled in the last 10 to 15 years to 8,000 amps of power because tenants are running more sophisticated technology. This power usage is expected to increase as warehouse tenants switch to electric truck fleets, Lang said.
“What we will see more and more of are closed loop circuits” with solar panels on the roof, battery storage and electric vehicle trucks charging stations on the property, she said.
The No. 1 feature that warehouse tenants want is more power, said Bob O’Neill, senior vice president, acquisitions for real estate manager CapRock Partners. They want more electrical capacity than the older buildings can offer, O’Neill said.
Not only do tenants want automobile charging stations but they are preparing for future delivery of EV semitractor-trailer trucks, he said.
In addition to AI, another development to watch will be the impact of drone delivery on the industrial sector, O’Neill said. Walmart is conducting pilot studies on drone delivery on e-commerce, he said. If widely used, drones could lesson truck usage.
While warehouse vacancy rates are still low with record absorption of new industrial properties, that rate is beginning to increase, O’Neill said.
Net absorption — the amount of space occupied minus the amount of vacant space — of industrial properties is expected to average 52.6 million square feet over the next two years, down from the peak rates of the last two years, according to the newest Industrial Space Demand Forecast, released by the NAIOP Research Foundation on Aug. 31.
The overall vacancy rate for industrial properties increased in the second quarter for the third consecutive quarter, up by 30 basis points to 3.7%, which was still below the 10-year average of 4.7%.
At the same time, port traffic has slowed by 26% due to the slower growth in China, he said.
But whether a warehouse would be considered obsolete also depends on the location. For example, older warehouses in certain, highly sought-after portions of Los Angeles and Orange counties in Southern California have been remodeled, O’Neill said.
In the past, some warehouses had been improved to add offices so that the tenants could use the property as it headquarters, he said. CapRock has remodeled those buildings, reducing the office space to increase the warehouse space, O’Neill said.
However, there is a limit. For warehouses that aren’t tall enough, O’Neill said that warehouse owners are better off tearing down the building and starting over, he said.