Industrial Warehouse Classifications1

Posted by Thomas Miller, CCIM

miller-industrial-properties-warehouse-classificationsThere’s a surprising amount of variation in the world of warehouses, and it’s not something you may notice until you find yourself in need of one. The next step is a thorough education in what makes one warehouse different from another so that you can be very clear on which one suits your needs now and into the future. A good source of that information? An experienced agent. But before you start begin that search, here’s what to know about warehouse classifications in northern Nevada.

Warehouse Classifications

In industrial real estate, as in all real estate, location is truly everything. As a potential lessee or owner of a warehouse, you should be crystal clear on governing authorities for different jurisdictions and what that might mean for you. If you’re already out of your depth – and the idea of determining flood zones and the differences between flood zone AE and X shaded sounds like learning a new language – consider it a sign. Navigating industrial real estate isn’t as straightforward as it may appear, and you would be well served consulting a professional who can shed some light not only on flood zone differences and how they might impact your operations, but the process as a whole.

Warehouses are classified as A, B and C. Pricing and amenities vary, and the lofty goal of any tenant should be a facility in the ideal location, with the right amenities, available at a competitive lease rate, with tenant-favorable terms. So where does an ambitious lessee begin? It’s not always an easy process, but you’re starting off on the right track when you have current market knowledge and a clear understanding of what you really need in a warehouse.

Warehouse Class A

The Class A warehouse has the highest base rent and operating expense costs, but these buildings also offer the most amenities and upgrades. Typically, class A warehouses have:

  • The tallest eave heights (30’ and up)
  • The highest density of fire sprinkler systems
  • The widest column spacing
  • The most cost-efficient building systems
  • The most spacious truck courts
  • The most trailer parking spots
  • A very high dock count with cross docking

Warehouses of this class are often found in the most desirable areas of northern Nevada, and they tend to be REIT owned and professionally managed.

Warehouse Class B

The B Class warehouse has a moderately priced base rent and lower operating expense costs than class A. They also offer some of the amenities found in class A. Locations are often in town, and these buildings can also be found in some of the older areas of Sparks and Reno.

Ownership tends to be mixed between REITs, regional investment groups and private investors. That translates to variables when it comes to ownership and management quality. Features of these buildings include:

  • Eave heights around 24’
  • Tighter column spacing than those in class A
  • Fire sprinklers are usually .33/3000 gpm
  • ESFR is rare
  • Potentially upgraded lighting, but heating will likely be dated
  • Shorter truck courts, often with partial use of the street necessary for 53’ trailers
  • Fewer dock counts with front or rear loading only (in many instances)

Warehouse Class C

The C Class warehouse is the lowest priced, and unfortunately, many of these buildings are considered functionally obsolete for use by today’s logistical operations standards. That makes them better suited for manufacturing operations that don’t require warehouse distribution features. These properties are rarely owned by REITs because they aren’t considered “investment grade. Ownership is nearly always a private investor, and property management can be less than ideal. Still, there are opportunities for the right lessee.

Choosing Your Warehouse

Deciding what suits your needs and your budget can be challenging, and a good agent can draw on experience and expertise to guide you. But beyond that, an industrial agent works for you, and that means your interests are contractually required to come first. Don’t settle for an arrangement in which the tables are turned – you’re short changing yourself, and it will likely end poorly.

If you’re thinking you can handle warehouse hunting by yourself, take a moment to read the following first for a better understanding of what that really entails:

One last tip – we offer a free guide designed to help you avoid paying for more than what you need. Download your copy now.

Our posts are intended to educate commercial real estate users so they can make better decisions in their real estate use, investments, buying and selling. We encourage your input and commentary. If you are enjoying these posts and finding them useful, help spread the word via Facebook, Twitter, LinkedIn, Google + or email with the buttons above.

About the Author

Thomas Miller, CCIM

Thomas Miller, CCIM is the president and broker of Miller Industrial Properties in Reno, Nevada. He has worked in industrial real estate since 1991, with 15 years of previous experience designing and building industrial warehousing and manufacturing facilities in the northern Nevada market. Contact Tom at tom@mipnv.com or 775-742-9891.

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