Is There a ‘Perfect’ Building? Your Warehouse Search Begins Here.

8/23/2016

In last month’s article we looked at Navigating a Tight Real Estate Market, and in today’s follow up piece, we will build on that idea to further assist you in any industrial property search. As we start, we need to ask ourselves the question, “Is there a ‘perfect’ building?” Well, not to keep you in suspense, the answer is, ‘sometimes.’ So, let’s look at 3 relevant criteria to evaluate what the ‘must haves’ are and the ‘we can live with-outs’ with your next property search.

Let's Take a look at the 3 criteria...

1. Size
2. Functionality
3. Budget

Size

Does size matter? Well, in this case it certainly does. To properly evaluate your needs for future industrial space we need to get some clarity on a few things:

Reflection on your past performance:

How much space do you have now and how long have you had it?
What has your growth pattern been over the years?
What has caused the need for more or less space in the past?

Projections on your future performance (as close as possible):

What is the driving force for your growth? Is it sales volume, new product(s), or new market(s)?
How long do you anticipate the increases to be sustained?
What could change in the near future to result in the need for more or less space?

Asking these questions can impact the decisions you make to acquire more industrial space now, either via lease or as a purchase. For example, if you are experiencing rapid growth, doing a long-term lease or purchasing a property may not be the best alternative now. However, if you have recently solidified a new long term steady contract or put off a move for some time while business sales have steadily grown, long-term leases or a purchase may be the better option.

As a result, you can be more flexible on the size of the space you are looking for depending on your past performance and the near and long-term business plan.

Functionality

Another key element in identifying your next industrial facility is the functionality, or building features, the space offers.

We can really break this down into 3 larger categories for consideration:

Manufacturing: space dimensions, column spacing, natural gas, electricity capacity, sprinkler capacity, existing infrastructure, proximity to customers.
Distribution: truck access and turning radius, loading dock doors, column spacing, clearance height, sprinkler capacity, freeways access & transportation routes, racking.
Administration: office needs, tenant improvements, parking, proximity for employees, proximity to nearby amenities, internet access.

For every business there are going to be items from the above lists that you must have. The importance here, in the review of these aspects, is to have a real estate advisor who, along with their network of specialists and contractors, can discuss your existing operations and competently help you determine your definite needs, especially as it relates to electricity and sprinkler capacity requirements.

Therefore, if you recognize the key components of a building that are vital to your business, you may be more flexible in looking at buildings that have those, but not necessarily some other features you simply hoped for.

Budget

The million dollar question after‘What do we want’ and ‘what do we need’, is ‘what can we afford’?

We saved this for last because size and functionality really have a lot to say about what we should anticipate and how flexible we can be with our budget.

For example, if you need a modern high ceiling, high density calculated sprinkler building you are going to have a higher cost PSF than if you can utilize a 2nd or 3rd generation lower ceiling manufacturing building. When considering our budget, we also have to look down the road to see if there will be budget constraints or potentially more capital available in the future. Perhaps we can stretch our rental budget in the short-term in anticipation of future growth, thus providing more building options to consider.

And so, we can either be flexible with our budget or flexible with the size and functionality we require of the building.

In Conclusion,
Based on the size, functionality and budget there are several levers that can be pulled to open up more options. The more flexible we can be, means that we don’t always have to find the ‘perfect’ building but we can find the building that works very well to help our business grow. And now and then, the right building turns out to be the perfect building.