The Many Considerations to Purchasing the Right Industrial Space for Your Business

The following is adapted from Industrial Intelligence.

Whether you’re thinking about purchasing your first industrial space for a business or relocating your company to a more ideally suited location, it is not a decision to be made haphazardly. 

Commercial real estate purchasing decisions involve a lengthy process. Rome wasn’t built in a day and neither will your new commercial property. In fact, even if you’re relocating to an already existing warehouse, expect the planning process to take months, if not, years. 

By familiarizing yourself with the many purchasing considerations that follow, you’ll be well-prepared and armed with all the information you need to make an excellent choice, even if it does take a while.

Planning for Proper Office Space

Most of the people you need to account for in your new space will be office workers and warehouse workers. You’ll need to know how many people to account for in both, but each space obviously has its own unique considerations for how to enable those people to be comfortable and successful.

Regarding office workers, you need to plan for the proper amount of break rooms, conference rooms, breakout rooms, training rooms, and bathrooms, as well as actual work areas. More specifically, you need to plan out the evolution of your office space. 

Traditional office build-out changed in the 2000s with the advent of the creative office concept. This change morphed conference rooms into collaborative areas. Private offices gave way to the open office concept to create more opportunities for people to bounce ideas off each other, and to increase density to lower overhead. However, this changed during the COVID-19 crisis, which increased the value of separation, sanitation, and personal space. Add to that the digitization of office work and paperless offices.

You’ll also need to understand what type of and the quantity of furniture and office equipment that will be used in each room to properly determine the necessary dimensions. 

Finally, are there any office areas that need to be immediately accessible to the warehouse? Sometimes this is a drivers’ break room, assembly area, lab area, quality control, testing, or another area that might need climate control.

Thinking Comprehensively about Warehouse Space

To determine the total square footage needed for warehouse space, break down the individual components such as, shipping/receiving, raw material storage, low and high pallet stacking areas, total racked areas, manufacturing, assembly, packaging, and anything else that may be unique to your business.

Don’t think simply about space, but the building lengths, shapes, and column spacing requirements that will optimize operations. For example, logistics operations prefer shallow and wide buildings with large speed bays. Moving and storage companies need longer walls for racking and stacking vaults. 

Obviously, your warehouse space needs to conform to requirements for fire suppression and other safety standards. Also, think about the machinery you’ll need and what kind of power you’ll require to run it.

Will your warehouse space require certain climate controlled areas? What are the ideal lighting conditions? Lastly, how many bathroom stalls will be required. Workers who manufacture and work with raw materials, run laboratory tests, or drive trucks may need their own bathrooms attached to the warehouse.

Considerations for Dock Equipment, Truck Court, and Yard

These areas are associated with warehouse space, but have their own unique considerations to factor into your evaluation of the property.

For instance, you must consider more than just the mere accessibility of docking doors. You should know how high the loading positions need to be; does it matter if the dock positions are on the interior or platform-based? If the docks need to be equipped with levelers, do you want mechanical or hydraulic versions?

Regarding the truck court, factor in how many trucks and how big they will be to allow for the necessary space. Also, consider if you’ll need a separated aisle strictly for driving, and if you have a need for trailer parking.

When thinking about the yard area, you need to first know if you’ll need your own space or if you can share it with neighboring businesses. In either situation, factor in any need for exterior silos, raw materials, refrigerants, chillers, backup generators, or any other outside improvements that might require additional space considerations, such as footings or screening, as well as the possibility for storing chemicals outdoors. 

Make Sensible Decisions Around Geography and Transportation

Today’s businesses run with a different set of expectations from customers. If they order a product, they expect it to be shipped promptly. The time of ordering something and waiting four to six weeks for shipping and delivery is long gone. Therefore, you need to make sure you choose a location that is close to your customer base. 

Additionally, consider any traffic patterns and future infrastructure projects that could become problematic to the point of interfering with operations. 

Some industries—particularly technology—may need to be in an area where the best talent lives or attends university or trade school to make sure your company has a steady resource for highly skilled workers.

Specialized Licensing and Regulatory Approvals

Parking isn’t the only aspect of your commercial property that may cross paths with local governments. Many industries have special licensing and regulatory approvals to consider.

For instance, if you are in the food production business, you know that over the last few decades it has become impossible to supply products to national grocery stores without being certified by the Safe Quality Food Institute. 

All industries should know the process for certifying a new building. If the certification process does not line up with your lease expiration and the start date of your new building, your operation may be unable to operate, or you may be stuck paying rent on two buildings, one of which you pay for to just sit empty. Either outcome is untenable. 

Hire Consultants for the Most Accurate Budgeting

Few things are more commonly unknown in commercial real estate than the actual cost of relocating a facility. You can simplify the process and hire one of the many consultants who budget and relocate for a living. They can estimate your project within 10 percent of the cost, within forty-eight hours of your inquiry.

You could certainly choose to handle the budgeting aspect of your project on your own, but is such a complex process, you will likely find that the time involved is more costly than the outsourcing of a skilled consultant.

The Challenge of New Facility Set-Up Costs

Start with the physical structure and the construction needed to make the building suitable for your company. Some of these improvements will be made at your own cost and expense. 

The challenge is that you are budgeting without knowing how much the future landlord will contribute for the office build-out. All costs related to your build-out must be considered: soft costs (architectural, engineering, consulting, plan check, permits); hard costs (construction); and tenant vendors (IT, cabling, audiovisual, security, signature, furniture, equipment).

No landlord will pay for everything you want to set up your new facility. But most of them are reasonable and will negotiate the costs of the entire set-up with you. Most landlords will provide an allowance to build out basic office and warehouse space with a handful of upgrades. Be prepared to negotiate and keep expectations reasonable so that your new landlord partnership isn’t damaged too far before you move in. 

Moving Out

This is one of the few expenses in a commercial real estate project that is mostly predictable. The main line item in this part of the budget is the moving and storage company. They will ask up front how much work you will do, so they can identify where you need support. Mostly, the cost will be determined by the relative size and distance of the move.

You’ll also need to consider the costs of decommission and restoration associated with your previous property. By simply reviewing your current lease, you’ll determine the items you’re responsible for removing. If you have constructed your own tenant improvements, the landlord will usually have the option for you to remove those improvements and restore the building to its former condition. 

Not a Gut Feeling

Honestly, most less experienced executive’s forgo 90 percent of the planning outlined in this article, choosing to operate on what “their gut” tells them is right. They might visit a few properties and pick the one that “feels right” to then. That method just isn’t wise when it comes to scaling your business. This is too big of a decision to leave up to “your gut.”

If you take the time to plan for all of the items you just read, the right property will emerge from the data, not your gut.

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For more advice on the many considerations to purchasing the right industrial space for your business, you can find Industrial Intelligence on Amazon.

Justin Smith is a sixteen-year veteran in commercial real estate brokerage with Lee & Associates. He holds an MBA, as well as a master’s of Real Estate Development from USC, and is a member of the global Society of Industrial and Office Realtors (SIOR), an association of top producers within the industry. He has completed over 500 assignments across the US and has negotiated leases with some of the largest, most sophisticated landlords in the world, including Prologis, Blackstone, GLP, Rexford Industrial, and The Irvine Company. He has represented executives in e-commerce, logistics, food and beverage, cold storage, automotive, aerospace, life sciences, and many other industries. Learn more about Justin at smithcre.com.