Budget for Your Industrial Lease Basics
Although budgeting is one aspect of industrial property security that is often overlooked, it is crucial for your company's success. No matter if you're renting your first or 20th industrial space, a well-planned budget will help your company achieve its short-term and long-term goals. This includes both the physical location and your overall business.
There are four phases to the process of creating a budget for industrial spaces.
Get a team of advisors.
Take a look at the Market.
Know your build-out costs.
If applicable, calculate your moving expenses.
Budgets are not always fixed. However, if you start your search for industrial facilities to lease with a clear vision in mind, it will guide you and help prevent your reach from being too far away.
Get a team of advisors
You'll need to include a wide range of disciplines when you create a team to assist you in creating a budget for industrial lease. First, and most importantly, you will need someone who can focus on numbers. This could be your chief financial officer or accountant. Your head of operations is an important collaborator. They will also need to understand how budget decisions affect operational efficiency. Additionally, you will need to have access to IT directors and human resources in-house, as well as third-party legal counsel.
Your CFO can help you understand how your lease obligation fits into your company's financial statements. This includes overhead expectations, financing, debt instruments, and possible merger and acquisition activities. Your head of operations will help you identify the growth trends in your operation and the capital investments required for your new facility. HR can help you understand how location choices affect your workforce and how your facility could better serve your employees. Your IT team can help you understand what new technology your operations team will deploy, as well as the timelines and equipment required. Finally, your legal representative will be able to confirm the terms of your lease (if any) and assist you in understanding the risks you need to budget for.
These team members are not the only ones you need. You may also want to employ a commercial realty broker to help with your search. Your broker will help you with the next stage of the process.
Take A Look At The Market
All of your resources can be used to create a plan and budget. However, if there is no inventory available or the cost of the space you desire, all your efforts will go unused.
With the growing maturity of the eCommerce industry, today's industrial leasing market has seen the prices of space rise and fall while space availability has dropped. These factors are causing companies to increase their budgets, and the time it takes to complete an industrial lease. You should work with a commercial broker who specializes in the industrial Market. They can give you an accurate estimate of the cost of the space and the time it will take to secure it. Other costs such as holdover rent at an existing facility, if necessary, will be affected. A knowledgeable broker can also provide data about tenant improvement allowances that can partially offset build-out costs. Information regarding security deposits and other costs that may be associated with industrial space leasing will also be available. The broker's fees are not something you should cut from your budget. The broker's fees are usually paid by the landlord of the property you rent.
Know Your build-Out Costs
It is important to understand your monthly rental costs and to create a budget to build your space. Although you won't be able to budget for space that you haven't yet signed a lease for, most of the costs are predictable and common for industrial properties. Office furniture, IT setup and audio and video setup, racking and material handling equipment, warehouse automation, robotics capital expenditures and tractor-trailer investments, platform, and scales. These expenses will all be fairly consistent across facilities. These costs can be negotiated with your IT professionals, human resources personnel, and the operational team.
Establish Your Moving Costs
Moving from an existing location will require you to calculate the cost of your move with a moving and transport company. A moving and transfer company can help you plan, budget, and execute your move. This will depend on how much work you do and how many hours they need to do. This will include all branding, artwork, and common items. Also, you will need to plan how you'll cycle your inventory to minimize stock being moved. You can make huge labor savings by removing all inventory from your existing buildings and sending it to your new ones.
You should not only estimate the cost of your move but also be prepared for expenses related to decommissioning an existing facility. Most common items that need to be decommissioned include equipment, furniture, cabling, telecom systems, and ethernet cables. If you have purchased a new rack, it is important to arrange for the sale and grinding of existing racking and the filling in of bolts.
You will need to take down your sign and make sure that the facility's operating systems are in the same state as when you arrived. However, some wear and tear are acceptable. Your operations team and the moving company can help you create a budget and estimate any money you could recoup by selling old materials.
