Leasing or purchasing a warehouse is a major decision with a direct impact on the bottom line of a company. With that in mind, today we offer an overview of the factors that must be considered when choosing a warehouse.
What Factors To Consider When Choosing a Warehouse?
Warehouses provide a centralized location to store and organize the distribution of goods, making them a key link in the distribution chain.
Choosing the right warehouse is no easy task, as several factors must be taken into account in order to make an informed decision in line with the needs of your organization. The list below aims to give you a sense of the variables that come into play when you take this important step.
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The old real estate adage, “Location, location, location” also applies to warehouses. A convenient location often translates into reduced costs, greater efficiency and, ultimately, higher levels of customer satisfaction.
When studying a location for a warehouse consider the following:
- Freeway access
- Proximity to ports and airports
- Workforce availability
- Utility costs
- Occupancy costs
- Access to public transportation
For example, the Inland Empire has become a warehousing powerhouse thanks to a unique combination of factors, such as its proximity to more than 20 million residents, easy freeway access, and two ports (Los Angeles and Long Beach).
The right warehouse must offer all the necessary features to support your operations. And since every organization has different operational needs, the features you have to look for in a warehouse will vary depending on aspects such as your industry and the type of goods you need to store.
As an example of the features that industrial occupiers look for in a warehouse, here are the results of a recent survey made by CBRE:
When selecting a new warehouse, how important are the following building features?
- Clear Height 81%
- Number of loading bays/dock doors 76%
- Power Supply 81%
- Capacity for expansion 76%
- Column spacing 76%
(Note that respondents could select more than one option, so the numbers do not add up to 100%)
Local legislation impacting commercial real estate is in constant flux. This includes complex issues like zoning laws, building codes, and taxes.
Any of the above can change within a relatively short period of time, potentially throwing a monkey wrench into the plans of landlords, tenants, and developers.
Again, Southern California provides a tangible example of how local legislation has a direct bearing on commercial real estate decisions.
Measure ULA, a ballot measure that aims to increase L.A.’s transfer tax on property valued more than $5 million, has owners contemplating whether to sell at least some of their assets before the measure goes into effect on April 1, 2023.
The measure, also known as “Mansion Tax” (although it applies to both residential and commercial properties) has been challenged in court, adding to the uncertainty of the situation.
Type of Lease
When you lease a warehouse, the type of lease determines who, between the landlord and the tenant, will pay for things such as real estate taxes, maintenance, and insurance.
Some of the most common types of commercial leases include the following:
- Full-service lease/Gross lease. The tenant is responsible for paying the base rent which the landlord uses to cover other expenses, including property taxes, utilities, and maintenance, among others.
- Single net lease (N lease). In addition to rent, the tenant is responsible for paying the building’s real estate taxes.
- Double net lease (NN lease). Here the tenant is responsible for paying rent plus two of the expenses associated with the building: real estate taxes and insurance.
- Triple net lease (NNN lease). In an NNN lease, the tenant pays rent plus real estate taxes, insurance, and maintenance.
- Absolute net lease. The tenant pays all the expenses of an NNN lease plus the expenses to maintain the condition of the property, including major repairs.
- Modified gross lease. Under this type of lease, the tenant pays base rent plus a proportional share of certain agreed-upon costs, while the landlord covers all the other expenses.
As you review the above factors, you may get the impression that choosing the right warehouse is a daunting challenge.
And while this decision certainly requires extreme attention to detail and a wealth of local knowledge, the good news is that you don’t have to go it alone.
At SoCal CRE Team, our group of dedicated commercial real estate professionals is focused on helping you find the solutions you need. Contact us today; we’ll be happy to answer all your questions.
Disclaimer: This material is for general information and educational purposes only. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.V
SoCal CRE Team: The Experts in Commercial Real Estate in Southern California
At SoCal CRE Team, we specialize in industrial real estate solutions in the most sought-after Southern California markets such as Los Angeles, Orange County, Riverside, Anaheim, and more.
Interested in learning more? Contact us today by telephone (714) 456-0500 or email at firstname.lastname@example.org.
To learn more about industrial real estate and the warehousing industry, take a look at our previous blogs, “L.A.’s “Mansion Tax” Is Challenged in Court: What You Need To Know,” “Warehouse vs Distribution Center: What Is the Difference?” and “2023 Commercial Real Estate Outlook.”