A 42 foot clear warehouse… and it has created a dilemma for a broker in the Northeast.

Attempting to market and re-lease an industrial asset specific to a user/occupier can create many challenges.  Somewhere in New Jersey, a landlord has hired a broker and asked that broker to release a building with a 42-foot clear ceiling height.

When a landlord/developer determines the initial pro forma value to build an asset with features relevant to an initial occupier and maybe only that occupier, some restraint must be utilized with foresight to future use. These specific features – unusual clear heights, diminished parking ratios and tighter turning ratios – might help land a tenant in the short-term but will provide hurdles in the future.

Should a landlord choose to build a characteristic-specific facility, the developer should enter into a partnership with that occupier so that long term asset value security can be maintained.  With a tenant partner co-investing in a characteristic specific asset, long term strategies for the facility can be realized.  I might submit that anything short of a 15-20 year lease is a detriment.

The broker tasked with re-leasing a 42-foot ceiling height asset will face several hurdles, not to mention the current state of the real estate industry. How many users are in the market that can utilize a 42 foot high ceiling? Mid-20s height is typical; 32-38 foot high is specific to distribution and logistics concerns; however 42 feet is an anomaly.

Clicks and mortar users, fulfillment users and high inventory turnover concerns will be unlikely tenants for this behemoth.  One of my associates suggested (tongue in cheek) that a ladder manufacturer might find a home here (haha).   In that vein, escalator companies, elevator companies etc, might be attracted as well

My counsel to developers, don’t build it if the specs seem unrealistic and out of balance with traditional industrial usage. If you are so convinced, make the user of this type of extraordinary space a partner and tie them to the asset via documentation.

-Paul A. Waters, SIOR, CCIM, CRE, FRICS

Based in New York City, Paul Waters, SIOR, CCIM, CRE, FRICS, is Executive Vice President-The Americas at NAI Global, where he is responsible for business development and client relationships among major corporate end users of office and industrial space.