Warehouse Tenancy Myths and What You Should Concern Yourself with Instead
Industrial – Workplace May 2017
The thing about being in the market for a new warehouse is: when you’re looking for something so big, it’s hard to think small. But when it comes to signing a years-long commercial lease, the little things are often more important than the large, obvious ones. And sometimes those obvious things should be crossed off your list all together…
MYTH 1: I need to find the cheapest warehouse
Of course the cost of your tenancy should be of primary concern – but make sure you’re looking at the total cost over your whole lease term, not just the number beside the dollar sign in the listing. Warehouse tenancies are generally the longest commercial leases, and when you’re signing on for 10 years there are many other factors to consider besides how much your monthly rent will be. To start: is the lease Gross or Net? The former includes operating expenses, the latter means you’re responsible for costs such as washing the exterior of the building, landscaping, repairs and maintenance (R&M) and management fees on top of the rental. When comparing leases, add up the value of your clauses and concessions carefully to see which tenancy truly makes the best financial sense.
Takeaway tip: Look at the total occupancy cost over the term of your lease, rather than just the listing price.
MYTH 2: It’s all about securing maximum height
While office and retail tenants are all about those square metres, warehouse tenants can get obsessed over how many metres of clearance they have above them – and all the things they can stack within it. But while extra stud height is great to have, cubic capacity is affected by what you’re storing, and if the building has sprinklers to meet regulatory requirements – which are changing all the time. Looking skyward and estimating pallet heights with a ‘she’ll be right approach’ is not the way to go. Takeaway tip: Invest in getting a racking specialist to overlay a racking plan over the building footprint to ensure you know how many pallet spaces you can realistically fit in. Then investigate the sprinkler system.
MYTH 3: It’s what’s on the inside that counts, isn’t it?
Not unless you pass the right parking lot and loading dock on the way in, it’s not. While you probably walk straight inside when viewing a house or a shop, viewing a warehouse should always start with assessing access to the site. Yard access and turning areas are of paramount importance, because any hindrance to product distribution will add costs right down the production line. This is the business end of your warehouse, so good business practice demands it to be your first priority.
Takeaway tip: Don’t be embarrassed to pull a measuring tape out if you need to ensure those precious few extra inches in the docking bay exist in more than your imagination.
MYTH 4: Health and safety starts inside
Yes, you probably have fallible humans operating heavy machinery to concern yourself with inside, but there are also dangers to look for outside your new warehouse door. On your inspection, check the orientation of the buildings, ensuring that they and their yards aren’t going to be overly affected by the weather – high winds, in particular. Will your vehicles be able to access the loading bay without being aversely affected? And are car and truck accesses separated for health and safety purposes? Takeaway tip: Ensure your potential yard has safe container set-down and truck manoevering areas.
MYTH 5: I can find a great warehouse by myself
Even if you could locate every warehouse listing on the market (hint: you can’t, as many are gone before they’re even listed), using the services of an agent is still an excellent idea. Getting through the door via a registered agent not only gives you the pick of the crop, it makes the signing process a lot less stressful. As we mentioned earlier, commercial warehouse leases are usually the longest type – so negotiating the best deal upfront is worth doing and worth doing well.
Takeaway tip: Negotiating a warehouse lease is a tricky business. Find the commercial leasing expert who will help you do it right at Bayleys.
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