The vacancy rate for commercial/
industrial properties in the Dallas/Fort
Worth area is a normal, healthy 9 percent. Even though facilities are plentiful,
Gary Lindsey, SIOR, Senior Vice President
in the local office of Grubb & Ellis
Company, says that businesses seeking
new or more space shouldn’t wait until the
last minute.
Allowing adequate time for a facility
search is critically important. One should
allow for the actual touring of properties;
narrowing the alternatives; issuing requests for proposals; analyzing the proposals; picking a building; space planning; document negotiation; finishing out of tenant
improvements; installation of racking,
phone systems / IT and personal property;
and, finally, the move itself. Taking one’s
eye off the timeline can result in holdover
penalties at the old location or, even worse,
ineffective negotiations if in a hurry.
In past years there was a tendency for
tenants and their representative to focus
solely on base rental rate and perhaps
some concession. Now a great deal more
time is spent negotiating deal points of a
lease document, for example, cap controllable operating expenses, options to
expand as well as contract, early termination options should things change before
expiration, indemnification for environmental conditions, etc.
Smart Business asked Lindsey about key
factors that affect a company’s occupancy
of industrial real estate properties.
When contemplating a physical move, what
should corporate executives consider?
Available trainable labor is always near
the top of the list. Most human resource
experts interested in opening a new manufacturing facility or distribution warehouse
are paying attention to where the labor
comes from in relation to the potential
sites. Mass transit and car pooling have
become much more important with
employees spending more of their paycheck on fuel.
Companies today are more focused on
total operating costs — meaning taxes,
insurance, common-area maintenance,
property management and all the ‘moving parts’ that get passed on to the tenant, not
to mention the cost of utilities.
Finally, location relative to proximity to
the interstate highways is critical due to
the high price of diesel fuel. Companies
must determine where vendors and suppliers are, as well as where their customers
are, in order to cut distance traveled and
save transportation costs. You can only
pass along price increases to customers for
so long before they get to a point where
they stop buying.
How important are environmental concerns
when selecting (to lease) or designing (to
own) industrial properties?
Developers and corporate America alike
are trying to figure out ways to save our
planet — like installing solar panels, using
wind power, installing adequate insulation
and collecting rainwater for irrigation
purposes.
In the U.S. and other countries around
the world, LEED [Leader in Environmental
and Energy Design] certification is the recognized standard for minimizing environmental impact. The LEED rating system promotes design and construction practices that increase profitability while
reducing the negative environmental
impacts of buildings and improving occupant health and well-being.
There are four LEED certification levels
— Certified, Silver, Gold and Platinum —
that correspond to the number of credits
accrued in five categories: sustainable
sites, water efficiency, energy and atmosphere, materials and resources, and indoor
environmental quality.
Within a year or so, getting LEED certification on industrial buildings is going to be
standard. Some places like California (but
not Texas — yet) are rewarding owners
with tax abatements and tax credits for
being LEED certified. They will eventually
penalize developers for building to old
standards.
LEED certification is really important to
most developers, who are hoping that their
prospective tenants are of like mind. The
12 percent to 15 percent premium for environmentally friendly buildings can amount
to quite a bit of money. Time will tell.
How much lead time should a company allow
for selecting and moving into an industrial
site?
Some transactions are not complicated at
all and can go quickly while others can be
painful. Allowing enough time to execute
the process is extremely important. You
would not believe how many large companies leave just a couple months window to
find and occupy a new building. Common
sense tells you that somebody leasing or
purchasing a significant building would
start six to eight months in advance — but
many don’t.
It’s important to allow enough time to
explore alternatives and create leverage so
potential (and current) landlords don’t perceive time constraints. The goal is to complete a comparative analysis and create
competition amongst several landlords.
Finally, establish a time line and hold team
members accountable for each step.
GARY LINDSEY, SIOR, is Senior Vice President in the Dallas Office of Grubb & Ellis Company and a 35-year veteran of the industrial
real estate business. Reach him at (972) 450-3249 or [email protected].