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Home » Industrial real estate: He who hesitates loses money

Industrial real estate: He who hesitates loses money

October 4, 2010
Toby Gooley
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Leasing or buying industrial property is not the province of real estate brokers alone. In many companies, warehouse and DC managers are expected to get involved in these transactions. Keeping an eye on market trends with the assistance of an industrial real estate specialist can help managers identify the best time to buy or lease, said Bob Mohr, chairman of the real estate firm Mohr Partners, in the "Supply chain/logistics Real Estate Optimization" session at CSCMP's 2010 Annual Global Conference in San Diego.

For example, Mohr said, when real estate demand is low, so are prices. That means now may be a good time for companies to buy the property they want before both demand and prices rise again, as they inevitably will. Buying can often be more cost-effective than leasing, he added, so if you're confident of the market, then act fast. To underscore his point, Mohr told of one California client that dilly-dallied and missed out on a $4 million savings as a result.

Mohr also discussed the intricacies of negotiating a favorable lease for warehousing and distribution facilities. Among his many practical recommendations:

  • Make sure the agreement lays out in detail which party is responsible for maintenance and repair for specific areas of the property.
  • If you're one of several tenants, be sure the lease specifies how your share is prorated and adjusted.
  • Specify who is responsible for common areas and who pays which operating expenses. Insist on a separate electric or gas meter to ensure you're paying only for what you use.
  • Address potential changes, for example, specifying whether the landlord has the right to move your operation within the facility and whether you have the right to give back unused space and adjust your payments accordingly.
  • Many landlords are willing to amend a lease for a warehouse or DC if it means you'll stay on for an extended period. But don't wait until the end of the lease to renegotiate; depending on market conditions, it may be possible to switch to a lower rate part-way through.

To get the full picture of the financial impact of the properties you lease or own, Mohr recommended conducting an annual review or formal audits of your entire portfolio. This should include a look at all of the properties and their related costs individually and in total.

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Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.

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