Warehouse and Industrial space can range from storage and manufacturing to distribution. Each Industrial property you consider will have it’s own requirements and obligations so make sure you understand the use of the facility and ask the owner, landlord, and listing agent lots of questions to ensure the space meets your needs.
Below are a few things you should consider when leasing Warehouse or Industrial space:
Heating, Ventilation, and Air Conditioning (HVAC) – The majority of Industrial buildings are not delivered with full building HVAC. If they choose to have it each tenant is responsible for the installation of their own HVAC unit. In a lot of cases you end up leasing a space that was previously leased by someone else and they had installed and used an HVAC unit. Because you don’t know if that tenant properly maintained the unit try to avoid assuming responsibility of a potentially neglected unit.
Negotiate with the landlord that you will pay for an HVAC maintenance contract to keep the existing HVAC unit property maintained, however if the unit needs a major repair or replacement the landlord should be responsible. Before signing the lease always require that the landlord have the HVAC units inspected and repaired (if needed) and certified in writing that they are in good working condition by a certified HVAC technician.
Operating Expenses (aka NNN) – Make sure you understand what is and what is not included in the operating costs and what can be excluded (e.g. roof repairs). Operating costs typically include taxes, insurance, and maintenance. You need to know what the landlord is going to pay for and what you will be responsible for.
Square Footage – Some landlord calculate the square footage differently. Make sure you know how they are doing their calculations and what they are including. Ideally you only want to pay for your usable square footage which is the actual space you occupy. Some landlords will try to include the area beneath the buildings drip lines and some will choose to calculate from the outside of the wall vs the middle or inside.
Parking Area – Parking lots require maintenance (asphalt or concrete) and some landlord’s try to make the tenants pay for that. Repairs and maintenance should be the landlord’s responsibility because is a long term expense and part of future property value calculations. What is the use of the parking? Who will be using it the most? Do you need to be able to park trucks or vehicles overnight? If so make sure you have the ability to.
Zoning – Make sure the Industrial or warehouse property is zoned for your intended use. Some retail tenants (e.g. martial arts) like the idea of leasing an industrial property because the lease rates are cheaper than retail. However if the property is not zoned for retail use they will not be able to lease it……unless they or the landlord is willing to apply for a zoning change. You also want to make sure the buildings parking ratio (spaces per 1000 sf) is sufficient for you. If you need more then consider another building or look at retail space.
Maintenance of the property – Make sure you know what the landlord is responsible for and what you will be responsible for. Trash will typically be at your expense.
Loading areas – Will you have products delivered or picked up via 18 wheeler or UPS type trucks? If so then you will need dock high loading and a truck court big enough for 18 wheelers to maneuver. Do you need the ability to drive trucks or other vehicles into the warehouse? If so then you need grade level loading. Whatever the case make sure you ask if the Industrial property has what you need or if the landlord is willing to install what you need. Trailers and trucks used to be 45 ft +/- however these days they are 60 ft +/-. What that means is you need at least a 120′ turning area. Older Industrial properties may not be able to accommodate this.
Electric – Make sure the Industrial properties have electrical power sufficient for your needs. Do you need 3 phase power? If you or the landlord does not know what is available then hire an electrician or electrical engineer to evaluate the building. You want to make sure the building has sufficient amperage and power so you don’t blow transformers or find out it’s underpowered later on.
Ceiling Height – Make sure you ask how high the ceilings are. If you plan on stacking products or equipment or operating large equipment you want to make sure you know how high you can go. Heights typically range from 18 ft to 25 ft
Expansion options – Ask the landlord if any adjacent tenants have renewal options. If you plan on expanding later on it would be nice to know if you have the ability to do so. If your neighbors have an expansion option on your space then negotiate to have the landlord move you at the landlords cost.
Floor Load – What is the floor load for the concrete slab vs what your intended use will be?
These are just a few things you should carefully evaluate before signing an Industrial or Warehouse lease. If you have any questions or would like to discuss with us don’t hesitate to contact us!