Businesses looking for warehouse space are finding themselves in an increasingly tight market. With industrial activity shifting as the country is deep in the midst of economic turmoil, it’s more important than ever for businesses to negotiate their best lease. 

Finding the right property is critical to success, but there are certain things that need to be taken into consideration before signing a lease. In this article, we will discuss some key points that should be kept in mind when searching for a new warehouse space and negotiating your best lease possible in today’s competitive market.

1. Opt for a Longer Lease 

The warehouse market is ever-changing as demand rapidly evolves. Interest in industrial markets has been tight since the pandemic. Online retailers dominated and the pressure for to accommodate consumer purchases with appropriate facilities drove down vacancy rates. 

However, we’ve reached a threshold where this interest is beginning to wane. Initially, to capitalize on the pressure on the industrial market, developers planned to build more warehouses. Now faced with high interest rates and inflationary pressure, companies that planned to expand their warehouse footprint are pulling back. This comes as the recent construction projects are gradually ready to lease. Now, warehouse landlords are wary of a newly saturated market and the negative effect its having on demand.  

But, regardless of how the market fluctuates, you can improve your stock by opting for longer term leases. Long-term tenants can launch more competitive negotiations with landlords, increasing the likelihood they get the best possible terms and price in their lease.

=Think about it. In the midst of so much uncertainty, you can guarantee them some stability. Your long-term tenancy will shield them from the volatility of demand, to some degree. They’ll be more willing to concede to your terms if they know you’re in it for the long haul. Long-term leases give you better footing for negotiation across the board. Don’t expect them to bend over backwards for a tenant who guarantees them income for just a few years. 

By this same reasoning, don’t discount any property that doesn’t entirely match your needs too early. With pressure increasing on landlords to find credit-worthy tenants, they may be more willing to provide you with a more compelling Tenant Improvement Allowance. This means that if you like the location of a space and its layout, but it perhaps needs higher ceilings or an upgraded HVAC system, your landlord may agree to cover costs.

Beyond these factors, are other key building specifications to be aware of. And it’s never too early to be prepared with how they may implicate your warehouse touring experience. So, enroll in the quick, free course below to learn the 70+ points to consider when looking for warehouse space. 

 2. Look Ahead and Start Early

Starting your warehouse search early is critical to finding and negotiating the best property and lease. Put time on your side, and a lot of it! 

Finding a warehouse is no quick and easy task. consider the length of time it takes to go through the process of finding new space. You never want to leave yourself without any options, especially since the industrial market is the most competitive of the CRE sectors. 

From beginning to end, you are likely looking at several months to find the optimal location followed by several weeks of negotiation. Then, depending on the state of your warehouse and lease agreement, you may need to buckle in for months of renovations to get the space in working order for your operations. 

The other key point to mention is that creating competition among other landlords will get you the best deal. If don’t allot time for this stage, you’re missing out on the market research and competition development that will improve your deal for the next few years.

So, if you still have several years left on you’re in an existing warehouse lease, start thinking about your options. Weigh factors like the percentage of vacancies in the area, comparisons across different geographical markets, and the optimal term length of a lease to analyze what your best warehouse lease possible looks like. 

3. Location and Widening Your Geographic Net

Location is key when it comes to picking the ideal warehouse. Your warehouse facility should be close to major transportation routes so that you can receive goods and ship products quickly and efficiently. Shipping and logistics availability is critical to a property’s ease of ingress and egress. 

Proximity to your customers and suppliers can also impact how quickly products and materials move from point A to point B, so make sure your warehouse is located near major highways and airports for quick delivery. Your business may even require more specific delivery means, including rail or barge but essentially, the main mode of transportation must be prioritized to ensure easy access to your warehouse facility while reducing costs. This is especially important because fast service has become a must rather than a competitive edge. 

Clearly, there are other factors to consider when deciding your optimal location, including: 

• Access to a reliable workforce
• Supply chain and transportation costs 
• Accessibility to major roads
• Where consumers are located 
• The commodity type you’re storing 
• Affordability and finding the right market

For example, where is there abundant and affordable talent? Being in an area of dense workforce availability will reduce the money and time spent training candidates while improving productivity. And, since workers are more readily prepared, accident rates will dwindle. Similarly, according to supply and demand, you may be able to spend less on payroll due to talent competition.

Look for other opportunities to cut costs in terms of location. Any company can save big by basing their commercial real estate in a business-friendly state. These areas allow for corporate savings across the board from lower rent, cheaper cost of living and price of fuel consumption, less taxes, etc. Their overall regulatory environments and tax structures are also more conducive to business success.  

Finding the right warehouse location also means analyzing which areas will offer economic or tax incentives. Just as you can create competition among property owners, you can pit local states and municipalities against each other to be offered the most beneficial package. But, know that you likely need to work with a partner who is prepared to negotiate on your behalf with municipal bodies. 

4. Work With a Tenant Rep

Selecting a warehouse is no easy task. Workforce availability, supply chains, warehousing processes, etc., will all influence your optimal warehouse location. The important thing to remember is there is no one-size-fits-all warehouse property. Different companies and inventories will require alternate layouts, geography, and facilities depending on their needs and production. The key is weighting these needs properly while examining how your tenancy may or may not fit into a particular market. 

When negotiating, it is critical to come prepared. The overall cost of our warehouse lease will depend on certain factors to consider, including:  

• The landlord and their willingness to negotiate  
• Building availability in your area  
• The term of your lease  
• The creditworthiness of your tenancy, etc.  

All these key points play a role in a company’s ability to facilitate smooth operations, so make sure you’re not leaving anything to chance. Working with a True Tenant Rep™ at iOptimize Realty® will give you invaluable access to a CRE partner who can support your ability to optimize your commercial real estate. 

Not only will Tenant Reps advocate for your financial interests and negotiate on your behalf. They can skillfully leverage the value of your tenancy while also saving you about 90% of your time and workload. Beyond extensive research, a Tenant Rep can find typically three times the sites that a corporate tenant or conflicted broker would encounter. This of course, increases the likelihood that you find the best location, but also the optimal terms and price. Finding viable sites and alternatives, then conducting a thorough cost-benefit analysis of each requires a certain level of due diligence that is nearly impossible were you to take on the task alone. So, take the burden off your shoulders and increase the ease and likelihood of success by reaching out to a True Tenant Rep™ at iOptimize Realty®

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