Industrial Development (warehouse + office)

9 Replies

Anyone interested in warehouse developments? Looks like we can buy and build to a 9% cap. My husband owns a metal pre-engineered building Company that builds these buildings. 

Looking at Building a 40,000 sqf office / warehouse. Broker says he’s got a line of interested renters and potential buyers because nobody is building these.

Seems this sector is extremely underserved. 

@Meg Epstein what kinds of tenants are you seeing that are interested in these? From what I'm reading recently, 40k sq feet is way too small. What kind of clear span height are they looking for, what length lease and what locations are they looking for?

I would recommend building the shell and not finishing out the office space until you have a tenant with a signed lease.  Each tenant will need a different % of office to warehouse space and potentially a different level (class A vs Class B) of office.  I'm in a smaller town in SC and it took me 11 months to fill a 15,000 sq ft warehouse just off the interstate. I had lots of interest but everyone needed something slightly different.  I was willing to up fit or change as necessary but nobody wanted to pull the trigger.  Finally got a great tenant but it was a long wait.

At another property, I have "flex space" with much smaller units 1,000 - 2,000 sq ft with basically a roll up door, a walk door and a bathroom.  I have no problem keeping them rented and am looking at adding more units of this type on the same property. 

Lousiville, Kentucky has experienced a number of warehouse and fulfillment developments thanks to UPS. 

Many of these are 150,000+ sf tilt up construction with docks, sprinklers and 28’+ Ceilings and clear span, all depending on the user. What is needed in your area—that’s the question. I haven’t seen many under 50,000sf recently around me.  

Consider procuring a tenant first then build to suit. How do you plan to finance? 

No agency / no legal advice 

@Meg Epstein thank you for the post. We are looking at developing small bay warehouse buildings in MN. I am very interested in talking to your husband and you about your systems. What’s the name of your company or website? my contact info is available at www.caspianrealty.com or yoh can reply here Thank you Meg

I've experienced the same thing in Chicago there's a ton of demand under 100,000 SF in Chicago and no one is building them. There's actually a simple reason why they aren't built - construction prices don't scale well under 100,000 SF and most institutional groups don't view them as big enough deals. Nashville is a strong market from what little I know about it. Building 40,000 Sf with an extra Acre or two of outside fenced storage is probably a home run for you guys.

Pre-engineered is interesting as maybe you can get the price down from precast? If you can build to a 9% Cap on 40,000 SF I would be very interested about discussing if you could replicate that in other markets? Curious what your construction cost PSF is for the building (w/ 10% office finish)? Precast in Chicago market is running about $70 with permits, architectural, and engineering. (+land acquisition costs)

@Jonathan Clark . I’m thinking of developing Flex industrial garages like you described in Methuen, MA. I have about two acres to work with. I think I can get 16,000 sq foot built. It’s right by the highway. Any suggestions for features, size mix, or finding good tenants. I’m particularly worried about hazardous waste disposal and ensuring tenants don’t create an environmental problem for me. Thoughts?

you can make potential tenants answer questionnaire about waste practices and then put in appropriate clauses in your lease. if they are going to generate haz wastem you could require a bond or L/C. that should cause the more careless to look someplace else.