I misread your post the first time, and I'm glad I re-read it because I was just about to propose this exact same idea.
To elaborate, I think this is a fantastic idea that can help address several common complaints, including premature urban sprawl, as well as one of my own.
With regards to urban sprawl, this change takes warehouses out of the building pool, which I think is a must if we want to impose a new restriction like "no buildings allowed outside the first ring". That rule is bound to severely restrict how many buildings you can have in a city, and it could make cities next to resources, mountains, navigable rivers and coastal tiles uncompetitive. Excluding Walls and City Centre buildings, there are currently 19 buildings in Antiquity, but if we exclude all the warehouses, that number drops to 14.
I would couple these changes with other changes like:
- Allow cities (but not towns) to construct districts on resource tiles at the expense of permanently removing the resources.
- Make the Bridge a special-function building, similar the Wall, that don't take up slots in districts.
Turning warehouses into improvements means that they're no longer permanent fixtures, and this is something that makes a lot of players hesitate to build these things. If a warehouse improvement is taking up valuable space for a wonder or a high-adjacency building, you can just remove it and re-build it elsewhere for a price.
I think Firaxis has been trying to incentivize players to overcome their dislike for warehouse buildings by adding more ways to improve warehouse yields (e.g. through city state bonuses and resources like turtles), but that's the exact opposite of what I would've liked to see. Warehouses, especially the production ones, were way too powerful to begin with, often even more powerful than many wonders. This is because of how early they unlock, how cheap they are, and the fact that it's so easy to increase their yields.
Here's what I would like to see instead. In addition to turning warehouses into improvements, we can introduce these rules:
- A settlement cannot have more than one copy of a warehouse improvement type. (This rule already applies to warehouse buildings. I'm just stating it explicitly since it doesn't apply to all improvements.)
- You can move a warehouse to a different tile without building over it, but you still have to pay the full price to re-build it elsewhere.
- A warehouse improvement can only be built on a pertinent improvement. (e.g. You can upgrade a farm to a Granary, but you can't upgrade a Camp to a granary. You already mentioned this.)
- A warehouse improvement adds yields only to the tile it's on and adjacent tiles with pertinent improvements that are in the same settlement.
This puts a hard cap of 7 on how much yield a warehouse can provide. In practice, it will be very difficult to reach this limit, partly because you don't want to put these in the first ring where your buildings need to go, and even in the second ring, you need to give up a district tile to even have a shot at a 7-yield warehouse. In addition, it'll be harder to place a district on a Mine and still be able to retain the same yields by immediately claiming a different Mine because the first Mine might've been within the warehouse radius but not the second one. As your settlement redevelops, you might find that most of its Mines, which used to be next to the Brickyard, are now in a different part of the settlement, and it might be advantageous to migrate the Brickyard to that side as well. At this point, you have to decide if re-building the Brickyard for 55 production for 1 or maybe 2 extra production per turn (until you decide to re-develop the new Mines as well) is a worthwhile investment.
The last little detail I wanted to mention is that I think only warehouse buildings in Antiquity should be converted to improvements. There are a couple reasons for this. One is that, since this change is partly motivated by the desire to limit urban sprawl in Antiquity, it makes sense to keep latter-age warehouses as buildings. If the one-ring rule goes away in Exploration, there's no reason to keep Exploration warehouses out of the building pool. Another reason for this is that Civ 7 has a pretty serious problem of buildings lacking individuality, and this gives us a way to distinguish Antiquity warehouses from their latter-age counterparts. I don't like how the Academy just feels like a second Library, and how the Observatory and University are just their direct replacements. Turning the Saw Pit into an improvement while keeping the Sawmill as a building can be a small step toward making Civ 7 Sim City interesting.