In nearly every city, warehouses dot the skyline. In some parts of town, they comprise almost the entire commercial real estate mix. Typically, warehouses are big and tall with lots of trucks surrounding them and mysterious contents inside. But from city to city, a warehouse is a warehouse, right? Actually, no. Warehouses can vary wildly from one to the next and if you use one – or have plans to use one – it’s in your best interest to be aware of the differences.
Before we even address the warehouse itself, remember that location is paramount. The jurisdiction matters – significantly. There are differing authorities governing them and you need to be clear about how that will affect you. Another important consideration – is it in a flood plane? If so, which one? AE, X, X shaded? Do you know the difference and how it may impact your operations? If not, it’s wise to consult someone who does.
Warehouses fall into three major categories – we call them A, B and C – and pricing and amenities vary widely from class to class. The trick is to locate a facility that meets your needs and nothing more, at a competitive lease rate and with tenant-favorable terms. Here in northern Nevada, there is well over 80,000,000 sf of industrial real estate with about 10% currently available, spanning from Reno to Sparks, out to Fernley and down to Carson City, Dayton and Minden. That’s a massive inventory, yet odds are high that just one specific site is the absolute optimum for you. Yes, finding it can be a challenge. But you can improve your chances of success with market knowledge, and understanding the general type of warehouse you need is an excellent start.
This class has the highest base rent and operating expense costs as well as the most “bells and whistles.” Generally, warehouses of this class are located in the most desirable areas and are REIT owned and professionally managed. They typically have the tallest eave heights (30’ and up), highest density fire sprinkler systems, widest column spacing, most cost-efficient building systems, most spacious truck courts and most trailer parking spots. Very high dock count with cross docking is also common.
- Warehouse Class B
The B Class has a moderately priced base rent and lower operating expense costs than class A, as well as a few of the amenities found in class A. Locations tend to be in town and in the older portions of Sparks and Reno. Ownership is mixed between REITs, regional investment groups and private investors, so there are variables with respect to ownership quality and management quality. Eave heights tend to be 24’ and column spacing tends to be slightly closer than class A. Fire sprinklers tend to be .33/3000 gpm, and ESFR is highly rare. Lighting may have been upgraded, but warehouse heating will be older. Truck courts tend to be shorter than class A with partial use of the street required for 53’ trailers and fewer dock counts with front or rear loading only as the norm. Trailer parking spots are rare.
- Warehouse Class C
Class C is comprised of the lowest priced locations. Many can be considered functionally obsolete properties for modern logistical operations use. Instead, they are best suited for manufacturing operations not requiring warehouse distribution features. These properties are almost never owned by REITs as they are not considered “investment grade” properties. Ownership is almost exclusively by private investors and property management occasionally can leave much to be desired.
Regardless of whether your needs fall into class A properties or class C properties, a professional commercial real estate agent should always consider your transaction to be of great importance and present numerous options for you to ponder. If you find yourself feeling otherwise, remember that your agent works for you – not the other way around. We invite you to contact us for assistance in locating the right northern Nevada commercial property.
And if you think you can handle warehouse hunting just fine on your own, take a moment to read our recent post, “Think You Don’t Need a Commercial Real Estate Agent? Think Again.” If you’re thinking of calling off the sign, read “The Hidden Trouble with the Landlord’s Real Estate Agent” first.