Important Value Drivers for Owner-User Buyers: Mid-Counties Industrial Property

As we continue to work with local buyers and sellers, we are finding more owner-user buyers are looking beyond the basic size and location functions of real estate in search of real value for the industrial property purchase they are considering making in southern California. Certainly for some, it is simply a function of price and exit strategy. But for owner-user buyers, those looking to take up residency and occupy the property they are purchasing for their existing business, features such as ceiling height, sprinklers, yard and power supply are becoming increasingly the drivers in determining value.
​A building at the right size and location, without these additional features, would be very costly to upgrade, thus putting downward pressure on the achievable price for the property. Additionally, many buyers will look for significant discounts to take on the project to renovate or upgrade a property. Properties with more versatile features will not only command more value, but having them in place will reduce the time to achieve a successful transaction when the property goes on the market.

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​First, let’s look at how “yard” space and the demand for it continues to evolve as supply chain volatility shifts. This fluctuation in recent years revolves primarily around trailer and container storage, as companies inventory strategies move to keep pace with international shipping capacity and local consumer demand. However, for the sake of this article, we will leave the larger scale outdoor trailer yards aside, and look at how the yard space that goes with the property affects value. The size of the yard compared to the size of the building creates a metric we call the ‘land coverage ratio,’ and a yard is generally any excess land square footage beyond two-times (2x) the actual building square footage on the same parcel. When you determine value for the yard associated with the building, it comes down to the functionality of the yard, and how useable it is. Factors contributing to this are wide ranging, from configuration to access, to city regulations on daily use. A large yard that is not too useable for most buyers does not increase value. Each yard needs to be evaluated in light of the company’s plans to use it. We can help you with that evaluation.

Power has also become more of a factor in recent years, as electrical demand has increased, less for manufacturers and more for charging of various batteries. Local manufacturing companies are still operating in CA, and the proper configuration of
electrical power can provide great efficiencies and cost savings with the power companies and utility bills. In addition to the local production and manufacturing demand, more and more buyers are driving electric vehicles and have employees with electric vehicles, including electric forklifts. Having additional electrical power provides both savings and efficiencies in production and more versatility to offer modern incentives to skilled labor.
The final item we will focus on here is a two-for-one. Sprinkler capacity and ceiling height are intricately intertwined in the eyes of some buyers, affecting both storage capacity and insurance premiums. The needs for each business evaluating a property vary widely here, and there are many combinations to consider. But generally speaking, higher ceilings and sprinkler capacity provide more storage capacity, heightened safety, and lower insurance premiums, thus increasing the perceived value of the property.

For a more thorough discussion on your needs as a buyer or to evaluate how your property compares to others if you are thinking about marketing it, please contact us today for an initial discussion and/or free property valuation.