Occupiers store goods in volume and pay rent on a floor plan. Cube parity turns that mismatch into a rent, and the wrong one.
Rent per cubic metre overprices height, because an occupier does not store goods in cubic metres: it stores them in pallet positions, and using extra height costs money in racking and handling. Price the taller building at the rent per pallet position of the lower one, deduct the extra cost, and split what is left. On an illustrative pair of warehouses at 10.0 and 13.5 metres clear, cube parity says 94.50 per m², the occupier's walk-away rent is 84.67, and a fair negotiated rent is about 77.33 per m², 10.5 per cent above the lower building.
Worked in full in Logistics and Industrial Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Two buildings of identical footprint, one taller than the other. The agent for the taller one divides the comparable rent by the clear height of the comparable, multiplies by the clear height of the subject, and quotes a cube-parity rent. The arithmetic is tidy, and it answers a question the occupier is not asking.
| Input | Value |
|---|---|
| Comparable building: clear height | 10.0 m |
| Comparable building: rent per m² | 70 |
| Subject building: clear height | 13.5 m |
| Clearance below the roof structure and sprinklers | 1.0 m |
| Height per racking level, pallet plus beam and gap | 1.75 m |
| Pallet footprints per m² of floor, aisles included | 0.32 |
| Extra racking cost to use the height, per m² of floor | 55 |
| Racking life and cost of capital | 10 years, 7% |
| Extra handling cost a year: high-reach trucks, slower picks | 5.50 |
Racking levels = ROUNDDOWN((clear height − clearance) ÷ level height)
Pallet-parity rent = comparable rent ÷ positions per m²comparable × positions per m²subject
Walk-away rent = pallet-parity rent − annualised extra racking − extra handling
In Excel: =ROUNDDOWN((H-1)/1.75,0) for the levels and =PMT(7%,10,-55) for the annualised racking.
| Basis | Rent | Versus 70 |
|---|---|---|
| Cube parity | 94.50 | +35% |
| Pallet parity, before costs | 98.00 | +40% |
| Occupier's walk-away rent | 84.67 | |
| Surplus split equally | 77.33 | +10.5% |
The surplus the height creates is 84.67 − 70 = 14.67 per m². How it is divided is a matter of negotiation, not arithmetic: a landlord taking between a quarter and three-quarters of it would let at 73.67 to 81.00. The cube-parity quote of 94.50 is not inside that band. It is 9.83 per m² above the point at which the occupier should walk away, 196,615 a year on a 20,000 m² building. Expressed per cubic metre, the fair rent is 5.73, well below the comparable's 7.00: the extra height is worth something, but each added cubic metre is worth far less than the average cubic metre of the comparable.
| Clear height | Levels | Cube parity | Pallet parity | Walk-away |
|---|---|---|---|---|
| 11.0 m | 5 | 77.00 | 70.00 | 70.00 |
| 12.0 m | 6 | 84.00 | 84.00 | 70.67 |
| 12.5 m | 6 | 87.50 | 84.00 | 70.67 |
| 13.5 m | 7 | 94.50 | 98.00 | 84.67 |
| 14.5 m | 7 | 101.50 | 98.00 | 84.67 |
Height pays in steps, not on a slope. An extra metre that does not complete a racking level is worth nothing to a pallet occupier: 11.0 metres stores exactly what 10.0 does, and 14.5 exactly what 13.5 does, while cube parity charges for every centimetre. The cost of moving to taller handling equipment is held constant here for simplicity, so a single extra level, at 12.0 or 12.5 metres, barely covers it; in practice a first extra level may be reachable with existing trucks, so test the cost line against the occupier's actual fleet.
The common mistake is to treat volume as the product and price it linearly. The occupier's product is pallet positions, or pick faces, or sortation throughput, and each converts height into value at a different rate and with a different cost. Cube parity also ignores who pays for the racking: a landlord's contribution towards taller racking changes the walk-away rent and should be netted out, in the same way as any other incentive in a rent the occupier can afford.
Before quoting a rent on height, measure it. Clear height to the underside of the lowest obstruction, sprinkler heads included, not the eaves height in the brochure, and check the floor loading for the taller racking. A threshold that has not been measured has not been passed.
Price height through the occupier's storage, not through volume. Here 3.5 metres of extra clear height supports 77.33 per m² on an even split of the surplus, and 84.67 at most, against a cube-parity quote of 94.50. The free rent, cube and net effective workbook runs the same test on the book's two buildings and splits the surplus without a single comparable.
Only as much as the extra storage it delivers, less the cost of using it. In an illustrative comparison, raising clear height from 10.0 to 13.5 metres adds two racking levels and 40 per cent more pallet positions, but extra racking and handling cost 13.33 per m² a year, so the occupier's maximum rent rises from 70 to 84.67, not to the 94.50 cube parity suggests.
Cube parity prices a building by rent per cubic metre: the comparable rent divided by its clear height, times the subject's clear height. A 70 per m² rent at 10.0 metres is 7.00 per m³, which gives 94.50 per m² at 13.5 metres. It ignores racking levels, which come in steps, and the cost of using the height.
No. Value comes in whole racking levels. With 1.0 metre of clearance and 1.75 metres per level, an 11.0 metre building stores exactly what a 10.0 metre building does, and 14.5 metres stores what 13.5 does. Cube parity charges for every centimetre regardless.
Case 1 in Appendix D of Logistics and Industrial Real Estate prices clear height without a single comparable; the free companion workbook runs it live. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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