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Vertical and Mixed-Use Developments May Preserve Washington D.C.’s Shrinking Industrial Areas

The George Mason Center for Real Estate Entrepreneurship (CREE) and the American Institute of Architects DC Chapter hosted an afternoon session at the Vertical Industrial conference last Feb. 8th to discuss the future of urban industrial in rapidly re-developing cities such as Washington D.C.  Sakina Khan and Ryand Hand of the D.C. Office of Planning gave an overview of the District’s urban industrial base and joined architects Chris Diloreto of Portand, Oregon and David Eisenberg of Vancouver, Canada who gave case studies of innovative industrial projects.

For any city to remain a viable place, it must maintain areas where goods are produced, necessities are stored and distributed, repair services are made available, and municipal services are housed.  These services and functions are often located in urban industrial zones.  However, over the last few decades, Washington D.C. has seen a steady erosion of its urban industrial base under the twin pressures of increasing land prices and more valuable alternative land uses.

The Hecht’s Warehouse – a D.C. industrial building converted in 2016 into retail-residential mixed-use. (photo from DC Office of Planning)

In 1975, Washington D.C. had 120 million square feet of industrial land.  Today, only 90 million square feet of land remains with an industrial use, a loss of a quarter of the city’s industrial acreage.  In addition, real estate services firm Jones Lang Lasalle estimates that the city has lost over 45% of its industrial building square footage to demolition and conversions to alternative uses, most recently to multi-residential use.  Of the remaining building stock, about 90% is over 40 years old and considered inefficient and obsolete.

Building modern urban industrial buildings is important for Washington D.C. for many reasons.  Industrial users and companies diversify the local economy and employment base.  Industrial jobs provide employment to workers without higher education but with appropriate training, and pay, on average, $4 to $7/hour more than retail sector employment.  Urban industrial spaces allow District residents convenient access to desired goods and services that otherwise would have to be sourced and transported from far-away locations.

The challenge for industrial owners and developers is to find new ways of delivering modern and efficient industrial space which are economically competitive with the alternative of building mixed-use residential projects.

The New York multi-story flex industrial project delivered in 2014 (photo from C. Diloreto)

Architect Chris Diloreto, principal of Diloreto Architects in Portland, Oregon, presented the 117,240 square foot, six-story New York flex industrial project which was completed in 2014 as the first new multi-story industrial project in Portland in the last 60 years.  The increased development risks from ensuring building and fire code compliance for industrial tenants working on different floors of a building paid off with a fully occupied building that attracted both technology and industrial users at triple-net rents of $21.50 to $23 per square foot.  An adjacent second phase building is being proposed with an additional mixed-use residential component.  Since the delivery and success of the New York project, two other similar multi-story flex industrial projects have followed in the Portland area.

Strathcona Village, a residential-flex industrial mixed use development delivering in 2018 in Vancouver (photo from GBL Architects)

Architect Dan Eisenberg of GBL Architects in Vancouver, Canada presented another innovative project called Strathcona Village, the first mixed-use residential project which allowed industrial flex uses in the lower street-level floors of the high-rise building.  Strathcona Village is a 299,000 square foot project delivering in 2018 with 350 residential condominium units and 59,000 square feet of street-level flex-industrial, retail and office commercial condominium units.  Buyers for the the flex-industrial spaces include firms in apparel production, beverages, a recording studio, and commercial kitchens.

Due to the mix of residential and light industrial uses, the design of the project paid particular attention to fire fighter access to industrial spaces, fire separations, adequate exit (egress) systems, noise control and odor control.

Light flex-industrial uses in mixed-use residential buildings also provide more allowable uses for street-level commercial spaces in high-rise projects which would have otherwise stayed empty or under-utilized in some sub-markets due to limited retail tenant demand.

The New York in Portland and Strathcona Village in Vancouver provide innovative case studies of developers and architects who pushed their cities’ regulatory envelopes to build vertical and mixed-use industrial designs that were new to their markets.  Vertical and mixed-use industrial properties may be a way for Washington D.C. to deal with the issue of high land costs and allow for the development of badly-needed modern industrial spaces.

The presentations at the Vertical Industrial conference can be seen HERE.

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