Finding a location to build a new plant or distribution facility is one of those rare good problems because it usually means your company is growing.
It’s kind of like the problem of having more orders than you can fill or earning more money than you know what to do with.
But a good problem can quickly turn bad if you make a rash or bottom line decision on the location. Just because the land is cheap and in the right neighborhood doesn’t mean you should snap it up, warns George Stevens, a certified industrial properties advisor for Grubb & Ellis Co. in Cleveland.
“It can be deceiving,” Stevens says. “All things being equal, you can look at the cost of the land. But that should really be last thing you look at.”
Here are some factors to consider before you buy some land for your first or latest expansion.
Know the terrain
Make sure the infrastructure is there. Find out where the gas, water and sewer lines are and how close are they to your prospective site. Sites that are called “fully improved” have all those utilities on the land ready to install.
The cheap acreage could turn into a false economy if property needs to be graded or rests on protected wetlands. Not only would those intrusions add cost, but they would also tack on an extra eight to 12 months onto the construction time.
Size it up
The warehouse or plant you’re building now can accommodate the current workflow. What about in five or 10 years? It will probably be cheaper to buy the extra land now for a future expansion at the site rather than wait until you need it to find it’s already been purchased or 20 percent more than it was five years ago.
“A good rule of thumb is you should be able to double your plant size on the site,” Stevens says.
Watch your neighborhood
If your expansion is due to an increase overseas business, there are many industrial parks in the area that have foreign trade zone designation. While the land might be more expensive in a foreign trade zone, the tax benefits in the long run will balance out those costs. For example, the Cleveland Business Park downtown is a foreign trade zone park run by the Cleveland Port Authority. There are also parks in Strongsville and Glenwillow that have the designation.
What’s around you? Locating close to restaurants, day care facilities and grocery stores will attract employees to fill job openings at the new facility. Think about the image of your company during your search. If you’re high-tech, you’ll probably want to locate next to other similar companies.
