The Vertical Advantage: Combating High Real Estate Costs with Smart Warehouse Design
When urban populations surged and space became scarce, developers responded by building upward. Skyscrapers and high-rises became the norm, transforming city skylines and enabling more efficient use of limited land. The result? Greater economic opportunity and prestige for businesses and residents alike.
What does all of this have to do with today's modern-day warehouse? It's simple: With rising real estate costs and land scarcity near urban hubs in the US, warehouse managers are following in the footsteps of many urban developers in the country. It's more affordable and feasible to build up rather than acquire more space for their warehouses and build out, and benefits include maximized use of floor space and increased throughput.
Read on to learn more about how today's US market conditions are leading to a vertical boom in warehousing and explore some of the solutions helping managers to maximize space efficiently.
Real Estate Costs and Space Constraints
Tight occupancy and rising labor costs in the U.S. have driven warehouse rents steadily upward. Industry reports show rates climbing from $7.96 per square foot in 2022 to over $8.30 in 2024 (*1), with no signs of slowing. At the same time, land scarcity near urban hubs has pushed vacancy rates for warehouses under 100,000 square feet to near-record lows, making small to mid-sized facilities increasingly rare and valuable, and pushing companies to maximize the potential of their current facilities.
Add rising operating costs and shrinking profit margins to the mix, and warehouse managers face mounting pressure. Uncertainty from U.S. tariffs has disrupted global trade, prompting many companies to stockpile inventory as a buffer against fluctuating costs. Profitability has already declined—from 10.58% in 2022 to 9.37% in 2024 (*2)—and is expected to fall further unless bold action is taken.
This all underscores the need to build upward and make the most of every square foot.
Vertical Automation and Smart Growth
How do you maximize storage space while optimizing labor and throughput in your warehouse facility? From incorporating mezzanine systems to automated storage systems and more, an array of solutions exist that can help offset rising real estate costs and labor challenges—maximizing existing warehouse footprints and streamlining productivity in current spaces.
Let’s take a look some of these solutions.
Mezzanine Systems
Mezzanine systems can significantly boost warehouse capacity—often by up to 50%, and in some cases, they can even triple the available storage space.
Mezzanines add another level to a warehouse. Think of them as a second story within your facility that helps utilize the vertical space between the main floor and the warehouse ceiling. While they can serve as an extra level of storage and expand the amount of inventory that a facility can house within the same footprint, mezzanine spaces can also be outfitted with office areas, picking and packing areas, and more to keep a facility organized and efficient.
Adding mezzanine levels is also significantly more cost-effective than acquiring more space. They're also flexible—and can be customized to meet current warehouse footprints and needs, and easily reconfigured as things change.
Find out more: Structural Solutions
Pick Towers
Pick towers are multi-level storage structures to help increase picking efficiency and maximize storage capacity in a warehouse. Since storage capacity and efficiency are two keys that warehouse managers are motivated to address to meet profit goals, these solutions can make a big difference when incorporated in modern facilities.
Pick towers often consist of multiple shelving levels and picking stations stacked vertically. They can also easily accommodate conveyors and automated picking technology to help further streamline warehouse operations.
Find out more: Structural Solutions
Automated Storage Systems
As warehouse managers look to build upward rather than outward, Automated Storage and Retrieval Systems (AS/RS) have emerged as a cornerstone of vertical optimization. These systems are designed to maximize storage density, streamline operations, and improve safety—all within a compact footprint.
Among AS/RS solutions, the Unit Load and Mini Load systems are the most recognized. Unit Load systems are engineered to handle large, palletized goods and can reach impressive heights of up to 40 meters, much higher than conventional racking and forklift-based systems, making them ideal for high-density storage. Mini Load systems, on the other hand, are tailored for smaller items, such as cases and totes, and offer rapid retrieval speeds, supporting high-throughput environments, especially in picking operations.
Both systems enable multi-floor pick stations aligned with racking heights, allowing operators to access inventory efficiently without traversing long distances or relying on forklifts in tight spaces. This not only enhances productivity but also reduces the risk of workplace accidents by minimizing traffic in dense storage zones.
Find out more: Automated Storage Solutions
Autonomous Mobile Robots and Automated Guided Vehicles
While not vertical in form, Autonomous Mobile Robots (AMRs) and Automated Guided Vehicles (AGVs) are smart solutions essential to modern warehouse efficiency. These mobile systems automate routine tasks, reduce manual labor, and support scalable, responsive operations—smart growth.
AMRs use sensors, cameras, and navigation algorithms to plan routes and avoid obstacles in real time—without fixed infrastructure. AGVs, though typically reliant on predefined paths, offer reliable performance for repetitive on-site transport tasks.
Both are easy to scale, allowing facilities to add units with minimal disruption—ideal for growing or seasonal operations.
The Answers Are Clear
Warehouse automated solutions, notably those that lead to vertical expansion and high-density storage within environments, are expected to grow at a compound annual growth rate of up to 15 percent through 2029 (*3). This growth reflects the increasing value these solutions offer in addressing key challenges faced by warehouse managers.
From mezzanine levels to vertically capable systems like pick towers, AS/RS solutions, and scalable technologies such as AMRs and AGV, today's warehouses can better take advantage of every inch of usable space and future-proof their facilities against evolving market situations and demands.
Ready to Optimize Your Warehouse?
Speak with our Daifuku experts to explore automation solutions tailored to your space. If you're you're based in the US reach out to our team at Daifuku Intralogistics America. For inquiries elsewhere in the world, our global experts are here to help. Discover how you can you boost productivity, maximize space—both vertically and horizontally—and unlock new efficiencies backed by decades of Daifuku experience.
Cecile Dick-Calmes
Marketing Manager, Daifuku Intralogistics America
Cecile is a marketing and communications strategist with over a decade of experience in digital marketing, thought leadership, and web development. Since 2021, she has served as marketing manager at Daifuku Intralogistics America, where she leads targeted communications to support business growth and sales conversion.
She holds a dual master’s degree in Marketing and Communications from ISCOM Paris and an MBA in International Business from the Leonard de Vinci School of Management. Cecile also earned certifications in Digital Marketing Strategies from Northwestern University – Kellogg School of Management and Data Analytics from the London School of Economics and Political Science (LSE).