Everything you need to know before you start your industrial space search

Finding the perfect industrial space for your business is a critical decision that can significantly impact your operations, efficiency, and bottom line. This comprehensive guide will walk you through the entire process of searching for and securing the ideal industrial property, from understanding your needs to negotiating the best lease terms.

About the Author

Madison Lewis

As an associate for the industrial team, Maddie works closely with the team to produce market surveys, draft proposals, and tour spaces with clients.
Chapter 1

The Industrial Space Search Process

Finding the ideal industrial space for your business is a complex journey that requires careful planning, thorough research, and expert guidance. 

This chapter will walk you through the essential steps of the industrial space search process, from defining your requirements to finalizing your lease. Understanding this process is crucial for making informed decisions and securing a space that aligns with your business needs and goals. 

By following these steps and partnering with an experienced industrial tenant representation broker, you can navigate the market with confidence and find a space that supports your company’s growth and success.

Defining Your Requirements

The journey to finding the right industrial space begins with a clear understanding of your company’s needs and goals. 

Start by defining your requirements, including: 

Consider both your current operations and future growth plans when outlining these requirements.

Setting Your Budget

Once you have a clear picture of your ideal space, it’s time to set a realistic budget. This budget should account for more than just the base rent. Consider operating expenses, utilities, and potential build-out expenses. Remember that industrial spaces often require specific modifications to suit a company’s needs, which can add significantly to your upfront costs.

Engaging an Industrial Tenant Representation Broker

An experienced industrial tenant rep broker brings invaluable expertise to your search. These professionals offer in-depth knowledge of the local market, access to off-market opportunities, and strong negotiation skills. Working with a broker can lead to significant time and cost savings. Most importantly, tenant rep brokers are typically compensated by the landlord, meaning you can benefit from their expertise at no additional cost to your company.

Conducting Market Research

With your broker’s guidance, you’ll conduct thorough market research to identify potential properties that meet your criteria. This process involves analyzing current market conditions, rental rates, and available properties in your desired areas. Your broker will leverage their market knowledge and industry connections to provide insights that go beyond publicly available information.

Download: AQUILA’s Latest Austin Industrial Market Report

Property Tours

Your broker will arrange property tours, allowing you to physically look at spaces and envision how they could work for your business. During these tours, pay attention to factors like the condition of the building, the layout of the space, and the surrounding area. Don’t hesitate to ask questions about the property, its history, and any potential limitations or opportunities.

Lease Negotiations

After identifying suitable properties, your broker will help you negotiate lease terms. This process typically begins with submitting a request for proposal (RFP) to the landlord, followed by a letter of intent (LOI) outlining your desired terms. Your broker will leverage their market knowledge and negotiation skills to secure the most favorable terms possible, including competitive rental rates, tenant improvement allowances, and flexible lease durations.

Finalizing the Lease and Moving In

Once you’ve agreed on terms, the final steps involve finalizing the lease agreement and preparing for your move. Your broker can guide you through this process, ensuring all terms are clearly understood and aligned with your best interests. They can also assist with coordinating any necessary build-outs or improvements to the space before you move in.

Timing Your Search

It’s crucial to start this process well in advance of your current lease expiration. 

  • For spaces over 50,000 square feet, begin at least 12 months prior to lease expiration
  • For spaces between 20,000 to 50,000 square feet, start nine to 12 months in advance
  • For spaces under 20,000 square feet, allow six to nine months

This timeline ensures sufficient time for thorough market research, negotiations, and potential relocations.

Read the full article: 7 Steps to Finding the Perfect Industrial Space to Lease

Chapter 2

Types of Industrial Space

Understanding the different types of industrial spaces is crucial for making an informed decision about your company’s real estate needs. Each type of industrial building is designed to serve specific purposes and industries, with unique features that can significantly impact your operations. 

Choosing the right type of space can enhance your efficiency, reduce costs, and support your business growth, while selecting an ill-suited space can lead to operational challenges and unnecessary expenses. Let’s explore the various types of industrial spaces to help you identify which one aligns best with your business requirements.

Bulk Distribution Warehouses

Bulk distribution warehouses are ideal for logistics and distribution companies. These buildings typically have high ceilings (18 to 32 feet clear), multiple loading docks, and large concrete truck courts to accommodate frequent traffic from 18-wheelers and box trucks. They usually have a small percentage (5% to 10%) dedicated to office space, with the majority used for storage and distribution.

Manufacturing Buildings

Manufacturing buildings often have specialized infrastructure to support production processes. This may include heavy electrical power, specialized drainage, ventilation systems, and reinforced flooring. These buildings are often custom-built to meet the specific needs of manufacturing companies, accommodating large machinery and complex production lines.

Cold Storage Facilities

Cold storage facilities are highly specialized warehouses with large-capacity coolers and freezers. These buildings require specific construction techniques to maintain sub-zero temperatures and are typically used by food distribution and manufacturing companies. They often feature specialized loading docks and advanced temperature control systems to maintain the integrity of perishable goods.

Data Centers

Data centers house computer servers and telecommunications equipment. They require large amounts of electricity, backup generators, extensive security systems, and robust HVAC to keep equipment cool. These facilities are critical for companies in the tech industry and those relying heavily on cloud computing and data storage.

Flex Buildings

Flex buildings offer a mix of office and warehouse space, providing flexibility for a wide range of uses. They typically have slightly lower ceiling heights (14 to 24 feet clear) and a larger percentage of office space compared to traditional warehouses. These spaces are popular with research and development companies, startups, and businesses needing both office and light industrial space.

Read the full article: Types of Industrial Buildings Defined (Warehouse, Flex, Distribution, etc.)

Chapter 3

Determining Your Industrial Space Needs

Accurately determining your industrial space needs is a critical step in finding the right property for your business. Underestimating your requirements can lead to operational inefficiencies and costly relocations, while overestimating can result in unnecessary expenses. 

This chapter will guide you through a comprehensive process to assess your current and future space needs, ensuring that the industrial space you choose can support your business operations effectively both now and in the years to come. By carefully considering each aspect of your space requirements, you’ll be better equipped to make an informed decision that aligns with your business goals and budget.

Evaluating Current Space Utilization

Start by evaluating your current space utilization and identifying areas of inefficiency or overcrowding. Analyze your workflow and storage needs to understand how space is currently being used and where improvements could be made. This assessment will provide a baseline for determining your future space requirements.

Read Next: Industrial Lease Renewal vs. Relocation: Key Factors to Consider

Forecasting Future Growth

Next, forecast your future growth, considering factors such as increased production volumes, new product lines, or expanded workforce. Try to project your space needs for the next three to five years, aligning with typical lease terms. This forward-thinking approach will help ensure your new space can accommodate your business as it grows.

Calculating Operational Space Requirements

Break down your space needs by function, including areas for production, warehousing, office space, and employee facilities. Consider the specific requirements for each area, such as ceiling height for warehouse racking or specialized equipment needs for production areas. Don’t forget to account for circulation space and any required buffer zones between different operational areas.

Factoring in Inventory and Material Handling

Assess your current and projected inventory levels, considering seasonal fluctuations if applicable. Think about your material handling needs, including space for forklifts or other equipment. If you’re in a business with high inventory turnover, you may need additional space for staging and processing shipments.

Considering Logistics and Compliance Requirements

Consider your logistics and compliance requirements when calculating your space needs. This includes space for loading docks, parking for employees and fleet vehicles, and areas for hazardous material storage if applicable. Ensure that your space allocation complies with relevant industry regulations and local zoning laws.

Adding a Buffer for Flexibility

Once you’ve totaled these space requirements, add a buffer to account for future growth and flexibility. This extra space will allow you to adapt to changing business needs without immediately outgrowing your new facility. A general rule of thumb is to add 10% to 15% to your calculated space needs for this purpose.

Read the full article: How to Calculate the Right Size Industrial Space for Your Business

Leasing vs. Buying Industrial Space

When considering industrial space, you’ll need to decide between leasing and buying. Leasing offers lower upfront costs, flexibility for growth or downsizing, and access to prime locations without the long-term commitment of ownership. The landlord typically handles maintenance, which can be a significant advantage for companies wanting to focus on their core business.

Buying, on the other hand, allows you to build equity, benefit from tax advantages, and have complete control over customizations and improvements. Ownership also provides the potential for rental income if you have excess space. Consider your company’s financial position, growth plans, and operational needs when deciding between leasing and buying.

Choosing the Right Lease Length

Industrial lease terms typically range from 3-10 years, with 5-7 years being most common. The ideal lease length depends on factors such as market conditions, your business growth projections, required tenant improvements, and desired flexibility. Longer leases often come with more favorable terms but less flexibility, while shorter leases offer more adaptability but potentially higher costs.

Read the full article: How Long of an Industrial Lease Should I Sign?

Chapter 4

Industrial Space Costs

Understanding the costs associated with industrial space is essential for making a sound business decision and managing your company’s finances effectively. Industrial space costs go beyond just the base rent, encompassing various additional expenses that can significantly impact your overall budget. 

This chapter will break down the different cost components, explain the factors that influence pricing, and guide you through the process of creating a comprehensive budget for your industrial space. By gaining a clear understanding of these costs, you’ll be better equipped to negotiate favorable terms and avoid unexpected financial surprises down the road.

Understanding Rental Rates

The cost of industrial space varies widely depending on location, property type, and market conditions. These rates can fluctuate based on factors such as proximity to major transportation routes, property condition, and local market dynamics.

To see the most up-to-date data on rental rates in Austin, read our article How Much Does It Cost to Lease Industrial Space in Austin, Texas? (Rental Rates).

Additional Costs to Consider

However, base rent is just one component of your total occupancy cost. You’ll also need to factor in operating expenses. These expenses cover property taxes, insurance, and common area maintenance. Additionally, industrial tenants are usually responsible for their own electrical and janitorial costs, which can vary significantly based on your operations.

Factors Affecting Lease Costs

Several factors can affect your lease costs beyond just location and property type. The length of your lease term can impact rates, with longer leases often securing more favorable terms. The overall quality of the property and any specialized features it offers can also influence pricing. Market conditions play a significant role, with high-demand areas commanding premium rates. Lastly, any tenant improvements required to customize the space for your needs can affect your overall costs, either through increased rent or upfront expenses.

Budgeting for Total Occupancy Costs

When budgeting for your industrial space, it’s crucial to consider all components of your total occupancy costs. This includes base rent, operating expenses, utilities, and any maintenance or repairs you’re responsible for under the lease terms. If you’re purchasing property, factor in property taxes and insurance as well. Creating a comprehensive budget that accounts for all these elements will give you a clear picture of your true occupancy costs and help you make an informed decision.

Chapter 5

The Value of an Industrial Tenant Rep Broker

Navigating the industrial real estate market can be a complex and time-consuming process, especially for businesses focused on their core operations. This is where an industrial tenant representation broker becomes an invaluable asset. These professionals bring a wealth of expertise, market knowledge, and industry connections to the table, offering numerous benefits that can significantly impact the success of your industrial space search. 

In this chapter, we’ll explore the key advantages of partnering with an industrial tenant rep broker and how their services can save you time, money, and potential headaches in your quest for the perfect industrial space.

Read Next: 6 Key Questions to Ask Before Hiring an Industrial Tenant Representation Broker

Specialized Market Knowledge

Industrial tenant rep brokers possess specialized knowledge of the industrial real estate market. They understand the unique requirements of different industries, from manufacturing to distribution to data centers. This expertise allows them to quickly identify properties that meet your specific needs and eliminate those that don’t, saving you time and effort in your search.

Access to Off-Market Opportunities

One of the most significant advantages of working with a broker is their access to off-market opportunities. Through their extensive network of industry contacts, brokers often learn about available spaces before they’re widely marketed. This can give you a competitive edge in tight markets where demand outstrips supply, allowing you to secure prime properties before they hit the open market.

Strong Negotiation Skills

Brokers bring strong negotiation skills to the table. They understand the intricacies of industrial leases and can navigate potential pitfalls on your behalf. By leveraging their market knowledge, they can secure favorable rental rates, tenant improvement allowances, and other concessions that you might not be able to achieve on your own. Their experience in negotiations can lead to significant cost savings over the life of your lease.

Time and Cost Savings

Working with a broker can lead to significant time and cost savings. They streamline the search process, handling property tours, lease negotiations, and coordination with landlords and their representatives. This allows you to focus on running your business while your broker handles the complexities of your real estate transaction. The time saved can be invaluable, especially for businesses where leadership is already stretched thin.

Long-Term Strategic Partnership

A good industrial tenant rep broker serves as a long-term strategic partner. They take the time to understand your business goals and growth projections, helping you develop a real estate strategy that aligns with your company’s vision. Whether you’re expanding, consolidating, or adapting to changing market conditions, your broker can provide guidance and support throughout your lease term and beyond. This ongoing relationship can be a valuable asset as your business evolves and your real estate needs change.

Read Next: How to Find Industrial Space on Your Own, and Why You Shouldn’t

Chapter 6

Next Steps

Finding the right industrial space is a complex but crucial process for your business. By understanding the search process, different types of industrial properties, how to calculate your space needs, the costs involved, and the value of professional representation, you can make an informed decision that supports your company’s growth and operational needs.

While the process may seem daunting, remember that expert help is available. An experienced industrial tenant representation broker can guide you through each step, ensuring you find the perfect space to drive your business forward. Their expertise, market knowledge, and negotiation skills can be invaluable in securing a property that meets your needs and budget.

As you begin your search for industrial space, consider engaging a tenant rep broker early in the process. Their insights and assistance can streamline your search, potentially save you money, and help you avoid common pitfalls. With the right space and the right terms, your business will be well-positioned for success in the years to come.

Ready to start your industrial space search? Contact our experienced industrial tenant representation team for a free consultation and expert guidance throughout your leasing journey. Let us help you find the perfect industrial space to support your business growth and success.

Ready to hire an industrial tenant rep broker? Read our Ultimate Guide to Hiring an Industrial Tenant Representation Broker.

Ready to Talk to an AQUILA Industrial Tenant Rep Broker in Austin, Texas?

Contact the AQUILA Industrial Team

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Want to learn about hiring an industrial tenant representation broker?

Read The Ultimate Guide to Hiring an Industrial Tenant Representation Broker