Why new warehouses include pickleball courts and food halls

Warehouse workers at the Goodman Commerce Center in California's Inland Empire don’t have to settle for vending machine snacks or reheated meals in a break room microwave. Instead, they can step to the adjacent Cravings at Eastvale food hall, where the menu includes freshly shucked oysters and hand-rolled sushi.

The food hall is part of a 200-acre mixed-use development that industrial landlord Goodman Group opened last year. It mixes millions of square feet of logistics facilities — leased to retail giants like Amazon — with stores and services that have made the warehouses more attractive to tenants at a time of steep competition for industrial real estate.

At a growing number of industrial complexes across the country, employees are surrounded by more than forklifts and stacks of wooden pallets. They can also drop off their child at an onsite day care center, hang out at the adjacent library or use a walking trail as some warehouse sites adopt features once exclusive to upscale corporate office campuses.

“The conventional warehouse we’re used to is no longer enough to compete for labor,” said Charlotte Elstob, managing director at JLL. “We have to introduce more amenities.”

After 10 straight quarters of rising U.S. industrial vacancies, according to CoStar data, tenants are gaining leverage in negotiations for space, and a top concern is retaining workers. The National Association of Manufacturers reports that 67% of manufacturers say attracting and keeping employees is their biggest challenge — above health care costs or the business climate. Still, 62% expect to expand their frontline workforce over the next year.

Developers like Prologis, Goodman Group, Link Logistics — and tenants like Amazon — are adapting quickly by adding upgrades and perks to try to create better workplaces for employees.

Lincoln Property Co.'s 210-acre Park303 campus in Glendale, Arizona, features high-end amenities including an outdoor lounge with pergolas, gas grills, plush seating and landscaping overlooking a pickleball court. In January, the developer signed a 483,300-square-foot lease with Logisticus Group, a logistics provider for a publicly traded alternative energy firm.

“Park303 was designed for just this type of user,” Lincoln Property Co. Executive Vice President John Orsak said in a statement. The features "supercharge logistics firms’ ability to work efficiently and attract top talent.”

To be clear, most warehouses still don’t resemble Silicon Valley campuses — and never will. Many still put the emphasis on operational efficiency rather than worker-centric design.

Still, the movement is gaining momentum, and developers are paying attention.

The shift to upgraded spaces is taking shape as the industrial market, like the office sector, works to recover from a supply-and-demand imbalance and address labor challenges.

Developers and landlords are under pressure to modernize aging inventory, while tenants weigh the rising costs of outfitting and operating facilities that attract and retain increasingly selective workers, real estate executives say.

It’s also feeding a continued “flight to quality,” with tenants seeking new or redeveloped buildings offering wellness features and tech-ready infrastructure, Elstob said during a recent conference in Los Angeles hosted by NAIOP, a commercial real estate trade organization.

EV charging stations, walking trails, landscaping and day care centers are just a few of the amenities that help Red Rock Developments' industrial properties attract tenants and stand out from their competitors, according to John Barker, president and chief development officer at the South Carolina-based firm.

"It's not just about making the workers happy. It's also winning the business," Barker told CoStar News.

Manufacturing labor — and other sectors that use warehouses — is becoming increasingly difficult to attract and retain, as workers shift toward less taxing roles in service sectors that offer comparable pay and better conditions, labor experts say.

Deloitte and the Manufacturing Institute project that U.S. manufacturers could need to fill approximately 3.8 million jobs by 2033. If current labor gaps remain unaddressed, about 1.9 million of these positions could go unfilled. Meanwhile, a 2023 NAIOP study, "Designing for Wellness in Distribution Centers," outlined the stark conditions industrial workers face: extreme indoor temperatures, loud machinery, repetitive motion injuries and poor access to nearby services and public transportation.

These challenges are prompting design interventions aimed at improving air quality, reducing noise and offering conveniences like food trucks or nearby retail, developers say. The goal: Make warehouses not just bearable but attractive places to work.

Tenants are clustering in higher-performing buildings that address these labor concerns, Laura Clark, COO at Rexford Realty, a public REIT and one of Southern California’s most aggressive industrial buyers, said at the NAIOP conference.

Renewals within the company's institutional-quality portfolio "are up more than new leases,” she noted, adding that existing tenants often have few alternatives when their leases expire. Rexford is currently repositioning 3.5 million square feet of older assets with updated sprinkler systems, increased cubic capacity and modern layouts.

“Demand for more functional space is what’s allowing us to push rent, and that’s driving demand,” Clark said. “We’re getting a 15 to 20% return on every dollar we spend on repositioning and redevelopment.”

The flight to quality trend is on display in Southern California, with tenants moving into a wave of new industrial inventory that's largely concentrated in the Inland Empire, while older buildings have lost occupancy, according to CoStar Senior Director of Market Analytics for Los Angeles Jesse Gundersheim.

Among Southern California logistics buildings over 100,000 square feet, tenants have occupied 107 million square feet of modern supply developed since the beginning of 2020. Meanwhile, tenants have shed over 30 million square feet of occupancy in older buildings, Gundersheim said.

As developers scramble to meet these new expectations, they face a fundamental supply problem. Roughly 60% of the nation’s industrial buildings were built before 2000 and lack the ceiling height and infrastructure needed for today’s operations, according to Carolyn Salzer, senior director and head of research at KBC Advisors.

Still, such development hinges on demand from tenants. That growth dwindled in the past two years in the wake of breakneck growth driven by the pandemic-induced e-commerce boom, and new headwinds are cropping up in the shape of tariffs.

Tenants are becoming more strategic as real estate costs balloon, according to Nicole Welch, managing director at Clarion Partners, which manages an $18 billion industrial portfolio across the Western United States. Still, industrial users like Amazon, Walmart and other e-commerce retailers are more aware of the necessity of investing in high-quality real estate than ever, she said.

“Think about the capital spend that is going into buildings these days,” Welch said. “I have a tenant who has a $200 million investment in a building that’s worth $80 million.”

When developers build on a speculative basis, they’re increasingly grappling with how much to invest in amenities. With tenants expecting features like full HVAC systems — which are considered an amenity and can cost up to $14 per square foot — the line between base building and tenant improvement is blurring.

“The expectation is changing from the tenant side,” Welch said. “The question becomes, all right, is that the landlord’s responsibility? Is it above standard? Is it somewhere in between?”

The new must-haves go well beyond technical upgrades.

“Bigger break rooms, outdoor patios and walking trails are all in demand,” Welch said.

Employee-friendly design isn't just for big-budget projects in major industrial hubs: Older properties can be retrofitted as well. Day care centers are especially easy to add, developers note, while parking spaces can be converted to outdoor lounges. Even adding windows and painting interior walls can make a property stand out.

At Red Rock's Smith Farms complex in Greenville, South Carolina, nearby residents use the outdoor park-like amenities just as much as — if not more than — the tenants, Barker said.

The amenities can help endear the sometimes criticized property type among nearby residents and make them more likely to get greenlit by local authorities, Barker said.

"Residents come over to us and go, 'I love your running trails, I love your walkways. I was skeptical when you came, but I love the fact that you really keep your place nice, tidy and clean,'" Barker said.

Even proximity to shopping centers or placement within master-planned communities can help with luring workers, KBC Advisors' Salzer said.

Employers are even embracing sustainability to win over younger employees. “Whether it’s doing a green roof or just cutting emissions of your transportation and adding EV charging stations — it’s important to have some sustainability components," Salzer said at the NAIOP conference.

Food is an important component, with some owners preferring mixed-use properties where workers can grab a bite at lunch or have a drink after hours, Salzer said, such as the Goodman Commerce Center in Southern California.

That complex is now 90% occupied, thanks in part to the Station at Eastvale, a 260,000-square-foot retail complex anchored by a 99 Ranch Market and the Cravings at Eastvale food hall that counts nine food operators including a boba shop, a sushi restaurant, a deli and a brewery.

Some warehouse developers are spending more on interior design, especially those whose tenants' workers are in high-skill fields like robotics, Melissa Kroskey, director at the nonprofit WoodWorks Wood Products Council, said at the NAIOP industrial conference.

Mass timber construction, once rare in the warehouse sector, is now gaining attention for its biophilic benefits — a design trend rooted in humans’ innate affinity for nature, Kroskey said. About 1,200 mass timber warehouses had been completed in the U.S. by the end of 2024, with another 1,200 underway.

Studies in offices and schools show exposing wood improves cognitive thinking and overall mood, she said. Amazon and Prologis have said they are already exploring the technique in their warehouse projects.