8 Factors to Consider When Acquiring a New Warehouse

The supply chain industry is booming. As industries grow and e-commerce drives demand for logistics services, many organizations find they need more space to manage new volumes. For many, this means purchasing a new warehouse.

While industrial vacancy have reached historic lows as demand for storage booms, some companies are managing to find available spaces. But even in this hot market, it is not recommended to rush to acquire the first available warehouse. Here are eight essential factors to consider when expanding into a new space.

1. Purpose of expansion

The first and perhaps most important thing to keep in mind is the purpose of the new warehouse. How the company will ultimately use the facility affects virtually every other aspect, so defining this early and in detail is critical.

Some organizations may want a new warehouse to provide more storage space for certain high-volume products. Others may want to create a dedicated space for reverse logistics workflows. While both scenarios warrant a new building, their specific property needs will vary.

Also consider the types of products, workflows, and machines the warehouse will host. For example, companies can only save 60 liters of flammable liquids in each closet and put only three closets in one room. As a result, a warehouse that stores these items may require more space than a warehouse that holds an equivalent amount of non-combustible goods.

2. Location

Location is a critical factor for any piece of real estate, but it’s crucial for warehouses. Where the facility is affects how quickly suppliers can supply it and how fast shipping is for customers. The cost of those inbound and outbound shipments also varies depending on location.

To find the optimal location, first think about the types of goods the facility will manage. Then determine where the target market for those products is and compare that to the locations of suppliers. An ideal warehouse position is relatively equidistant from the source and destination.

It is also important to take into account the available personnel in the region. Real estate may cost less in more remote locations, but it will be more difficult to find enough staff to run it.

3. Accessibility

Similarly, logistics companies should discuss the accessibility of the warehouse and its location. With more than 70% of all goods sold in the US traveling by truck, the facility will be dependent on highways. As a result, being close to freeway exits or other major roads will help streamline operations and reduce shipping costs.

It must also be reasonably easy for employees and large trucks to reach the warehouse. Small access roads with sharp curves or poor pavement make getting there less easy, hindering staff productivity and impacting shipments. Also be aware of rush hours and how crowded the area can get.

4. Size and capacity

Next, companies must consider the size and capacity of potential warehouses. Again, this ties in with the end goal. If the facility primarily handles reverse logistics workflows, space is not as pressing an issue as it is when it comes to managing peak volumes in the shipping season.

If a business is growing rapidly and has reason to believe that growth will continue, it may be best to purchase a space that is larger than current needs. This way it has room to expand in the future. On the other hand, if an area is too large, the rent or property taxes may be too high for the company to justify.

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5. Financing

As companies compare their options, they need to consider financing. That includes more than just a general budget. Before considering a purchase, organizations need a defined financing plan, including potential loan sources and terms.

Financing a commercial real estate loan is often more challenging than people think. Several years ago, as much as 52% of commercial real estate agents reported that clients failed to secure financing for a commercial property. Given how common that is, companies should make sure they have enough assets to take out a loan in advance.

Offering a larger down payment can increase a company’s chances of getting a loan. Companies should also prepare in the months leading up to financing talks to ensure they have sufficient liquidity.

6. Staff

Another critical factor that some organizations overlook is the staffing needs of the warehouse. This is shown by recent studies 73% of warehouse employers struggle to find workers. Therefore, it can take careful planning and a lot of time to ensure that a warehouse has enough staff to staff it.

Companies must take this tight labor market into account when planning expansion. They may need to automate more processes than they can staff, which creates different space requirements. If they know how many employees to expect at the start, they should make sure there is enough space for them, including ample parking.

7. State of maintenance

The state of repair of the facility is another thing to consider. Any property will probably need some updating before it is ready for business use, but if it requires too much work, it may not be worth it. Repairs and maintenance make an otherwise affordable warehouse too expensive – companies should factor these considerations into their budget.

It is important to note how much repairs will cost and how long they will take. Prolonged maintenance will delay the return on investment, which can make it prohibitively expensive. In some cases, organizations may defer some repairs, but only if they do not impact workplace safety or productivity.

8. Hazards

Finally, companies should look at any security risks on the premises. Work-related accidents and fatalities are the main concerns in industrial workplaces and cost the nation $171 billion in 2019 alone. If a building is too dangerous, it could put workers at unnecessary risk or increase repair costs beyond a company’s budget.

When inspecting a property, look for slippery surfaces, aging infrastructure, limited visibility and similar workplace hazards. Some may be excusable, but require specific signage and safety protocols once the facility is up and running.

It is also vital to consider greater environmental hazards. Warehouses in some areas may be at greater risk from hurricanes, tornadoes or other natural disasters, requiring specific safety precautions. Businesses need to understand all of these risk factors before purchasing a property.

Consider warehouse features carefully before purchasing

The purchase of a new warehouse can be an excellent move for a logistics company. However, that decision must be a careful one if she is to make the most of it.

These eight factors can help organizations find and manage the ideal real estate. They can then expand safely and efficiently, ensuring future growth with minimal disruption.

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