If you’re underwriting industrial real estate the same way you underwrite an apartment building, you’re going to miss the real driver of demand.
Because in industrial, square feet is only half the story.
The real value driver is often cubic feet—and one of the cleanest shortcuts to understanding that is a single measurement:
Clear height.
Clear height directly impacts:
- what a tenant can store
- what kind of operations can run inside the building
- how “functional” the space is for modern logistics
- and ultimately, who will pay for it (and how long they’ll stay)
Square feet tells you the size. Clear height tells you the capability.
Two buildings can both be 50,000 SF.
But if one has 16’ clear and the other has 28’ clear, they are not competing for the same tenants in many markets.
Higher clear height typically means:
- more efficient racking
- better storage density
- more flexible use cases
- stronger tenant pool (often higher-quality, better-capitalized operators)
That’s why when you’re evaluating industrial, you should start asking:
- How does this space actually get used?
- What types of tenants want this?
- Does the building’s geometry match modern demand?
Clear height can influence rental demand and tenant quality
Industrial tenants aren’t all equal.
Some tenants want “cheap space.”
Others want space that improves operations.
Clear height can be a filtering mechanism that naturally attracts:
- more sophisticated tenants
- longer-term users
- operators who understand efficiency and throughput
A simple underwriting shift
When you’re looking at industrial, don’t just write down:
- rent per SF
- price per SF
Add these questions to your initial screen:
- What’s the clear height?
- Who is the likely tenant profile for that clear height?
- Is demand in this submarket trending toward higher functionality?
