“There are no secrets to success. It is the result of preparation, hard work, and learning from failure.” – Colin Powell
If you’ve worked through the lease vs. own analysis for your next building and you’ve decided that owning is for you, Congrats! You have reached yet another decision point. Should you buy an existing facility or develop a new one from the ground up? Sometimes, the decision is made for you because you have a unique requirement in a market that has no available supply of facilities meeting your needs. If so, you should begin the process of working towards developing your new facility a minimum of twenty-four months out. It is important to begin the process early so you can avoid making hasty decisions because you ‘have to’ versus making the best long-term success decisions for you and your business when you have plenty of time to study the options.
Take the case of my client Bill, an entrepreneur who has been growing his industrial remanufacturing business for eight years. Bill has always leased, and his next lease renewal was coming up in twenty-four months. He knew he needed to expand again, and he was also planning for his retirement in the next ten years.
Bill decided that, rather than continuing to lease, he would either purchase or develop, and he knew he needed to get started early. Unfortunately, his particular submarket had limited availability of properties that might, with some modifications, meet his needs. The challenge for Bill was that the cost for the available buildings at the time was averaging over $100 per square foot. Through some investigation and multiple pricing exercises, we determined that Bill could construct a new facility, designed to his specific needs in the exact location he desired, for less than $80 per square foot. I’m sure you know which option Bill chose to pursue and he still had enough time to get it done.
Preparing for and executing commercial real estate acquisitions and developments can be a complex and challenging undertaking, even for experts. Business owners’ objectives will vary, but long-term goals typically focus on maximizing wealth. Managing these transactions can be a major distraction for entrepreneurs and business executives whose areas of expertise are in different industries.
With proper analysis and strategy, those risks can be managed, and your industrial facility can be leveraged as a tool to move you toward your long-term wealth goals. Reach out to a trusted advisor in your market and work through your options with as much advanced notice as possible and you will prosper.
John B. Jackson is director of Industrial Services with Colliers International in Tampa Bay, specializing in the leasing, sales and development of industrial properties. He has a diverse background as a developer, site developer, general contractor, Fortune 100 financial analyst, and real estate consultant. Jackson recently released his latest book, “Warehouse Veteran: Your Tactical Field Guide to Industrial Real Estate,” which offers key advice on critical industrial real estate topics.