Re-printed from Ontario Industrial Magazine
Whenever a new site is planned it makes sense to analyze the merits of a Design/Build custom facility versus an existing structure.
The advantages of a Design/Build can be substantial as you can plan the optimum material and communication flow and then create the structure that best supports it.
Your Realtor can help match you with a single source developer who will provide a ‘turnkey’ facility to meet your specifications and if you do not have the necessary skills on your permanent payroll can recommend a qualified professional to help you identify the optimum process layout and translate it to the Design/Build architect.
This approach allows you to have the exact footage that your operation requires and the correct mix between plant and office, avoiding the occupancy costs of too much and the inefficiency of too little. Ceiling heights and cube can be planned to strike the best balance between efficiency, building costs and heating and cooling costs while accommodating the appropriate lighting and sprinkler or heat detector systems. Building columns can be planned for maximum efficiency ; yard design can reflect your particular traffic patterns ,parking requirements and security issues and you can ensure the right configuration of docks and doors . Appropriate mechanization can be built into the design to accommodate factors unique to your business. Future expansion can be allowed for by pre-planning where and how you would add footage, roughing in the necessary docks and doors on the expansion walls, including footings that would support mezzanines if required and ensuring that grading, drainage and snow removal take account of both present and future needs.
With such advantages any operation large enough to require a free standing building of 10,000 sqaure feet or more should consider a Design/Build with analysis of these 4 issues
1/ What is the timetable for being operational in the new site?
A reasonably straightforward warehouse/distribution facility can be physically built within a few months but to this must be added the time requirements for operational design, building design, planning permission, building permits and any substantial customization and automation. In many cases the design can be a modification to an existing module and it will help if the developer has existing pre-approval for a structure of similar size and usage to your requirements. However the time-frame for building permits varies greatly according to intended use and municipality. It is prudent to double the length of time that you are advised for any municipal approvals so if rapid expansion or other circumstances dictate a quick move an existing structure may be your only short-term option.
2/Are you financially prepared to buy rather than lease ?
If you are a reasonably well-established business and your requirements are such that the resulting facility would be generally appropriate for a broad range of subsequent owners or tenants you may be able to lease a Design/Build project through a developer who already owns a suitable piece of land.
In this case it is likely that the capital costs of certain custom features that will have limited residual value to the developer must be paid for by you as “leasehold improvements” . However, unless you are a genuine blue-chip or “triple A” operation intending a very long lease you will have difficulty getting a substantially custom project built for you to lease, particularly on land that the developer does not yet own and must buy for the purpose. So generally for a highly unique facility you should be financially capable of buying.
In this case your Realtor can advise you of appropriate sites that are held by developers who are prepared to undertake a design/build. This provides the important advantage that you do not bear the cost of financing the land during the planning and construction period and give the developer a powerful incentive to complete the project on time !
3/ What is the supply and demand for existing space in the local market ?
You need to determine whether the market is balanced or whether there is an over-supply which should result in better costs for either existing or design/build space.
If there is a significant excess supply of existing facilities that meet your basic needs for footage and ceiling height you may save enough on the acquisition to pay for some key improvements and then review any overall cost savings against any reduction of efficiency compared to a custom site.
However, if the market is reasonably balanced the capital cost premium for a design/build is usually more than offset by the operational savings.
As a ‘rule of thumb’ the larger your overall space requirement the greater the payback on a design/build as the potential for operational savings is exponential while the costs of design and customization rarely rise in direct proportion to the size of building.
4/ Don’t forget the intangibles.
In comparing design/build against existing space the capital costs versus operational savings can usually be quantified quite accurately. However, design/build can also offer significant intangibles in terms of both employee morale and customer satisfaction and loyalty. Employees appreciate an environment that has been designed to make them as effective and productive as possible and to reduce their fatigue and ensure their comfort. Seeking their input on the new facility is not just good PR it is also good business as they usually know where the bottlenecks are. From a customer standpoint there is both practicality and prestige in providing a state-of-the-art facility, with opportunities for good publicity during the planning and construction pahse and for strengthening relationships by means of facility tours when your site opens for business.
Paul Graham is the owner and Broker of Record for BUYERS REALTY INC. Please direct your questions to paul@buyerscall.com or to his direct line, 905-607-4400
