Tom Miller, CCIM
How far in Advance Should I Look for Industrial Real Estate Space?
First, let’s establish that as a tenant, you should really never look for your own real estate. It’s like anything else that requires specialized training, knowledge, experience and expertise; let the professionals handle what they do while you handle what you do. What’s more, in this case, your professional will be paid by others if you conclude a transaction, so what’s not to love? I have previously addressed the aspect of picking the right agent to work for you, so let’s assume you’ve read this and hired the most fitting agent for your needs. Let’s answer the question posed in the title of this post. There is no cut-and-dried response. I cannot advise you to begin searching for industrial real estate space three, four or six months in advance of your need. And the reasons why that magic number varies are exactly why your real estate professional can bring so much value to your business relationship.
Let’s say your business is growing and you definitely need a larger space when your lease is up. You have considerable time remaining on your current lease, so you plan to tough it out in the interim and get the space you need when your current obligation is expiring. But if you call your experienced agent, you may learn you have options today of which you are unaware . There are three avenues that come to my mind immediately that would allow you to move your business into that larger space quickly, if not almost immediately, and shed that the current lease obligation.
Maybe your business is shrinking. It happens despite the best planning and effort. Sometimes you really need less space and the reduced overhead that comes along with it. There are two solid plans that I can put in place that would reduce your overhead and get you into the size space that’s appropriate, allowing you to focus on your business and get relief of extra overhead that further reduces your bottom line.
If you are entering a new market for the first time, your lead time varies based on your needs. If you have basic needs in a balanced market, such as northern Nevada at this time, the lead time is as short as a few months before you can be moving in. However, even in an overall balanced market, available vacancy in the exact size range you are looking for can vary considerable. If you have budget constraints, then again, that can limit your choices, meaning your timing to secure a location can be extended. Occasionally, new tenants require specific building features that add time and complexity to the search time, such as extra wide drive-in doors, truck docks on very small-sized warehouses, rail to the building, yards, high amounts of power, etc. Nearly everything can be accommodated sooner or later, but the timing to complete the transaction tends to extend to get these items negotiated and into place. Based on these factors, the sooner you engage your real estate professional, the better. Once a decision is made to explore an area as a potential location, it isn’t too soon to take advantage of the services of a real estate professional.
If you’re a lease renewal candidate, the earlier you get your agent into the mix, the better. There are many strategic advantages that time buys you in the renewal process and as time shortens, so does your negotiating power. There are four or five surefire ways to secure the very best renewal rates and terms possible. The earlier your agent gets started, the more he has at his disposal. If you wait until the landlord offers a renewal rate, it is already late in the process and your agent is now coming up to bat for you with one strike called already. The landlord has now beat you to the punch and has a slight upper hand already in the negotiation. If you’ve already personally been in communication with the landlord’s agent, this may be another tick against you.
The common thread in all of these scenarios is to engage your real estate professional as soon as you have made up your mind that you i) need a bigger space, ii) need a smaller space, iii) want to explore a new location, iv) decide to renew where you are now. If you have the right agent on your team, he should be invaluable in the process.