I recently was a guest on The Industrial Real Estate Podcast.
Its host, Chad Griffiths, is a fellow industrial real estate broker and Society of Industrial and Office Realtor. We share a passion for industrial real estate and authoring books about our craft – his, Industrialize, and mine, The SEQUENCE. Our 60 minutes together was not quite Mike Wallace-worthy, but for two professionals geeking over truck doors, it was close.
As I reflected on our conversation, a thought occurred. In the time Chad and I have brokered — he more than 20 years and myself over 40 — how many classes of industrial real estate have become obsolete?
As the mind dump morphed into a review, I believed it to be column-worthy. So here goes.
Concrete block structures
In the 1960s and 70s, the standard for small- to mid-sized warehouses in Southern California was concrete block. At the time, it was inexpensive, durable and easy to build.
Fast forward a few decades and block buildings fell out of favor. Why? They were prone to cracking, offered limited design flexibility and were far less energy-efficient than tilt-up concrete panels.
Today, investors look at a block structure and immediately calculate how much it will cost to either retrofit it for earthquake safety or scrap it altogether.
Shorter warehouses
What was once considered “plenty of clearance” is now laughably short.
In the 1980s, 16-20 feet of clearance worked just fine when distribution was more about floor stacking and hand-moving pallets.
Then came the rise of racking systems, e-commerce fulfillment and the drive for cubic efficiency.
A 20-foot clear building today is relegated to mom-and-pop distributors or creative reuses like breweries and gyms. Institutional tenants won’t touch them. Now, 24 feet is the minimum bar, with 32-36 feet quickly becoming the new normal.
Insufficient truck loading
Dock-high loading once meant a few truck wells tucked into a building’s backside. That was fine when trucks were smaller and supply chains less demanding.
Now, tenants expect wide truck courts, multiple dock positions and a minimum of 130-foot depth for maneuvering 53-footers. A shallow court or limited dock access instantly disqualifies a building from consideration. In fact, I’ve had clients walk away from otherwise functional properties simply because the loading couldn’t accommodate modern logistics.
Converted warehouses
During the telecom boom in the 1990s, a frenzy of industrial-to-telecom conversions swept the market.
Warehouses were gutted, generators added and raised floors installed to handle racks of equipment. When the bubble burst, many of these facilities sat dark, expensive and ill-suited for their original purpose. Few could be economically converted back to warehousing.
They became the white elephants of the industrial world, proving how risky it can be to over-specialize a building.
Early dot-com data centers
Much like the telecom conversions, the first wave of data centers built before the dot-com collapse were designed for a world that never fully arrived.
Oversized chillers, underutilized floor space and outdated cabling left them obsolete within a decade.
While the need for data centers eventually exploded, it was the next generation — purpose-built, hyper-efficient facilities — that captured the market.
The early versions often limped along, trading hands at discounts before being demolished or radically reconfigured.
R&D flex buildings
Once the darling of the 1980s and 90s, R&D flex buildings were designed with equal parts office, light manufacturing and lab space. They attracted tech startups, defense contractors and medical firms.
But as industries changed, those needs shrunk or migrated into either pure office towers or specialized industrial campuses.
Flex buildings with 50% office and 50% warehouse became hard to lease. The market wanted either full warehouse/distribution or Class A creative office — not the in-between.
Today, many flex projects have been scraped, converted to logistics buildings, or repositioned for other uses.
Obsolescence in industrial real estate is both predictable and instructive.
What was “state of the art” in 1985 may be functionally useless today. Brokers, investors, and occupants alike should remember: buildings have life cycles just like everything else. The trick is recognizing when a feature is no longer an asset but a liability — and acting before the market forces your hand.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.