A Perfect Warehouse Investment - A Los Angeles Warehouse Profile

From the desk of John Scatoloni

The United States attracts many forms of real estate investments that create sustainable wealth through both income and appreciation. Most commonly we enjoy these rewards as homeowners in our own residential properties; in essence, paying rent to ourselves, maintaining the asset and at the same time enjoying yearly appreciation in property value in the anticipation of a future sale date for a profit.

However, there is another type of real estate investment worth consideration that creates steady wealth accumulation via direct participation in the commercial business sector of the U.S. economy, the strongest and most stable economy in the world. The question is how can you derive the income benefits of owning property while concurrently growing your business? As the largest industrial market in the country, Greater Los Angeles offers a proven demand for quality industrial space with an ever limited supply. Ownership of an industrial asset begins with an immediate need for functionality and features. The key to ownership is that your needs are the same as the investment criteria to attract a tenant or buyer in the future.

 

Let’s demonstrate this approach in detail. . .

In choosing your industrial investment, think like a tenant, more precisely: “your future tenant or buyer”. It is this industrial space that you will know thoroughly while the business and at the same time gain a complete understanding of the features that make up a quality, functional, and economically sound investment for the long-term. Site selection began first with the right location; second - adhering to a customer service viewpoint and finally a design that promotes business development. Achieving each will ensures success creating wealth through investing in industrial space.

 

Logistics and Safety:

The Los Angeles basin and adjacent counties fall into nine distinct geographic and functionally make up nine individual markets. Abundance makes the decision of “location” a difficult one; however, using four benchmarks will narrow your location to a few specific industrial clusters. Ease of freeway access and a minimum 3.0 turn ratio per day for container drayage from the ports eliminates the vast majority of inferior locations. If truckers can not find the warehouse or the route is prone to congestion, the logistic viability is jeopardized. Furthermore, as fuel costs and traffic increase, so does the lease rates and sale prices for industrial space with good access to the ports. Evidently the rates are consistently higher and the vacancy rates are lower than logistically unfriendly markets. An investor should focus on properties within one-hour arrival time from the ports. Adding in a reasonable level security in the facility and yard area, including the ability to store containers, product and trucks, flushes out cites with medium to high theft rates. Albeit, some cities share proximity with the ports, only a hand full can claim security for owners and client products. Ask yourself, “Would I work in the warehouse after hours and on weekends”. If you can honestly answer, “Yes” then your future tenant or buyer will say the same and view the location as worth considering.

Customer Service and Design Layout:

In addition to logistic concerns, a perfect warehouse should include a focus on customer service. When choosing an industrial investment pay attention to how efficiently the warehouse fits into a customer service network, which means the warehouse is in a location central to your past, present and future clients. Keep in mind that industrial space serves customers based on proximity, ease of deliveries including operational flow of the distribution warehouse and yard efficiency. Each aspect plays an important function in obtaining and servicing clients. Indirectly the customer service approach to choosing a warehouse also impacts the operational budgeting, inbound and outbound transportation, inventory levels, facility costs, labor and security.

For example, a dock high loading capability is a minimum threshold between a functional distribution space and an obsolete warehouse for storage. Choosing dock high loading buildings with a minimum of twenty-four foot high clearance ensures distribution companies will view the property positively. Finally, adaptability for future requirements is a must as demands on a typical warehouse strain capacity. Some common future expansion points include a parcel large enough for current use plus expansion in container storage yard and truck staging. Future adaptability should address increased product flows, cross dock capability, single point entry for staging and security. And, in the warehouse, additional areas for ventilated pick n’ pack, a dedicated return area for long-term storage, and the possibility for more office space should sales volume increase. The most important aspect is in viewing an industrial investment as a asset providing comprehensive benefits for future tenants and buyers.

 

Key Benchmarks for Design:

1.Concrete Tilt-up

2.Built after 1995

3.True Dock High Loading

4.Minimum of 24 Feet High Clearance

5.Sprinkler System

6.Secured Yard with 110 Foot Turning Radius

7.Street Frontage Visibility

8.Office Standard Finishes

9.Minimum of Three Restrooms

10.Excess Land or Yard for Expansion

Long-term Perspective:

Ultimately, companies look to purchase an industrial investment for four key reasons: to increase productivity, reduce operating expenses, increase customer service levels and create sustainable wealth. One key factor is common to all: a well-designed, well-operated warehouse will be a competitive asset serving today and tomorrow's distribution needs for future tenants and buyers; determining which property to acquire sets the stage for investment returns. Remember to maintain a long-term perspective on the building features and a strategic plan for logistics, safety and of course customer service. The essence of a sound industrial investment, therefore, is the quality of the relationship between design and the customer operating in the space. You, the owner, buy more than space, you’re really providing solutions for future tenants and buyers logistics and customer service needs. Finally, future tenants and buyers may change but the logistics and design features remain the core decision in choosing an industrial space. You’ll find that if the site selection process for an industrial investment is done well, there will be an emotional connection to your future tenant and buyer’s success and a real satisfaction in knowing that your investment has long-term value.

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