Please Take This Personally

As a commercial real estate broker in the year 2000, I was involved in the sale of a 400,000+ SF midwestern warehouse. At that time, and in that local market, good quality warehouses of over 20’ clear height were selling above $20 per SF, but this one sold for less than half that.

About 40% of the building was 2 story, so there was considerable functional obsolescence. Even though both stories were in excess of 18’ clear and the property was in good condition, the idea of multiple floors in a warehouse harkened back to decades-old building practices in urban environments.

But the advent of online retailing is a great example of how things can change. In April 2017 a well known international industrial developer/owner broke ground on a 3 story 500,000+ SF warehouse. It is located in a rapidly growing western U.S. area, where there’s a lot less flat land compared to the midwest; nonetheless multiple storied industrial buildings are still news!

While it is certainly a warehouse, the new property is called a fulfillment center and had two requirements for development: a) proximity to a large population center for the “last mile” delivery of online sales, and b) material handling systems through use of robotics. Given the huge & rapid technological improvements in robotics, this is sure to be a trend.

To determine total valuation for these properties, the challenge for assessors will be to separate the real property from the personal property. A future appeal tactic will undoubtedly be to attribute much of the total value to personal property for faster depreciation.

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