It isn’t always about finding the perfect location but many of the small details also need to align with the needs of the business. Here are just a few things to consider if you are looking to lease space.
PHYSICAL NEEDS TO CONSIDER
Physical space needs are among the first considerations when leasing an industrial property. Prospective tenants should have a clear idea of the operations that will take place in their new facility and what they are looking to get out of this investment. Industrial properties are used for everything from retailing to manufacturing and warehousing, and each space needs different features to function well for its intended purpose.
Knowing that equipment needs may be different for manufacturers compared to retailers, know the capabilities of the facility from the perspective of electrical needs is critical. With that in mind, below are some terms that may come up when touring an industrial space and descriptions for each.
Three-Phase: This type of electricity is fairly standard in industrial properties and typically used for manufacturing and warehousing. Some benefits of three-phase electricity include the fact that it is more economical and can be safer since it runs at a lower voltage. It may also offer more consistent power output and have the ability to handle the carrying loads as various pieces of equipment are started and run at various times.
Single-Phase: This type of electricity is typically found in industries with lower power requirements and is similar to residential service and standard duplex outlets. Because this type of electricity has a smaller capacity, it is typically used when a business does not need to run several pieces of equipment on one circuit.
Understanding how much voltage is available within the property is also a key factor when choosing a property. Below is a quick overview of voltage sizes and capabilities for each.
110V – Usually found in flex industrial properties and smaller industrial units.
208V – This level of voltage can be found in three-phase or single-phase systems. It also has a lower power output, so it is most often used to power small, lower energy equipment.
480V – This level of voltage can also be found in three-phase systems providing over two times as much power on the same current compared to 208V (high efficiency). For businesses that have high-energy equipment, this would be the best choice.
Access to external storage is also something to keep in mind. Generally, outside storage is a regulated use and can be open or secured facilities. Regulations are determined by local zoning codes, size regulations, screening, and location. Outside storage is useful for a variety of things; from a service company needing to store company vehicles to a manufacturer storing raw materials to finished goods.
Generally, all types of businesses that are looking to lease industrial space need to have access for trucks to unload production materials and load products for shipping and distribution to customers. But the type of loading area within the building can vary. Below are two types of loading to keep in mind:
Grade Level Access – For businesses that may only need small service trucks to deliver their product locally, have a loading door to the warehouse that is at street level may be acceptable.
Dock High Loading – For businesses that may need to use semi-trucks for national distribution, dock heights of at least 48 inches from ground level to the floor of the warehouse is the standard. The type and style of dock levelers and associated equipment will vary by property, from lip plate, manual to hydraulic levelers.
For businesses that need warehouse space in addition to manufacturing space, it is essential to plan for adequate clear height. Clear height is defined as the usable space for tenants to stack inventory and is measured from the eve, peak, or clear height. Clear height is the distance from the floor to the lowest point of the roof or support frame of the structure. Clear ceiling heights of industrial buildings can typically range from 18 to 36 feet. Buildings can certainly be 40 feet or higher, but demand for ceilings that high is generally low and creates a larger area to heat or temperature control. Knowing what the anticipated inventory storage needs will determine the necessary clear height. Storage is often maximized with racking and understanding ceiling heights. Racking requirements will help you maximize use of the facility.
OFFICE AND SUPPORT REQUIREMENTS
When leasing an industrial space, it is vital to define how the space will logistically meet the needs of the business. How many people will be working in this location? Are private spaces, large open spaces, public spaces for a show room floor, or unobstructed warehouse spaces needed? Having a general understanding of these space needs will provide the commercial brokers with the details necessary to provide a list of properties that are most suitable.
When calculating the cost of rent for industrial properties, it is important to know the base rent, which is typically quoted on a dollar per square foot ($/SF) annual basis. The anticipated Monthly rent is dependent on a number of factors: length of the term, tenant credit, final negotiated rate, and more. It is calculated:
[(Amount of Space Leased x Base Rent) + CAM Costs and Direct Expenses and Services] / 12 months
Common Area Maintenance (CAM)
Common Area Maintenance covers the expenses associated with maintaining a property. CAM includes property management, maintenance and repairs, grounds-keeping and landscaping, snow plowing, and exterior and parking lights along with a tenant’s proportionate share of taxes and building insurance. With CAM, the Landlord provides these services for the complex as a whole, and then bills the tenants monthly at a price that has been calculated based on a prorated basis according to the amount of space leased. This amount is typically reconciled on an annual basis to account for any changes, either positive or negative, under a CAM reconciliation process.
Triple Net Lease (NNN)
Triple Net Lease refers to the type of lease in which the tenant of the space is responsible for the majority of associated maintenance costs of the building in addition to rent. Associated CAM costs and operating expenses include things like building insurance, real estate taxes, building repair, and snow and lawn care. In addition to Base Rent and CAM/operating expenses, tenants are also responsible for their utilities. Triple Net Leases are flexible and give tenants the most control over CAM/operating expenses. In theory, if the tenant can keep costs low, this turns out to be a very economical option.
A Modified Lease, referred to as Modified Gross Lease or Modified Net Lease, is a lease where the Landlord covers some of the Net Expenses in the Base Rent. Modified Gross/Net Leases include most, if not all, CAM/Operating expenses within the base rent. However, tenants maintain responsibility for any utilities associated with their suite. This lease type provides tenants a fixed annual rent to budget for, without the concern of having varying monthly operating expenses. An example for our market would be snow removal costs. If one year experiences greater snowfall than average, the tenant would not be responsible for the increased charge.
HOW WE HELP
Bradley Company’s desire is to help you check all the boxes to make your search easy and pain-free. With a client-first mentality and comprehensive understanding of the market and available properties, our seasoned brokers are committed to helping you find your ideal location. Our team’s knowledge coupled with our negotiating skills, helps to ensure that you get your property on terms that work for you. Our brokers will work alongside you to help you figure out what you want and get you what you need. Choosing a broker to help during this process is not only a good idea, but it’s good business. Utilizing our expertise saves you time and money which you can then focus towards doing what you do best, while we work to do what we do best.