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Not all industrial buildings are the same

May 13, 2023

As we’ve discussed many times, commercial real estate is as varied as a teenager’s moods.

Sure, we deal in three specific asset classes: industrial, office and retail. But within each are subcategories that create the variations.

Certainly, a regional mall is different than a Mimi’s Cafe. Your doctor’s office has different amenities than your CPA.

Today’s column deals with the features that define the different types of industrial buildings. There are three main categories of industrial buildings: manufacturing, logistics warehouses and flex. So how do I know which category appeals to the genre of industrial occupant? Continue reading and I will draw the distinctions.

Manufacturing buildings

Manufacturing buildings are generally constructed of concrete, concrete block or metal. It’s also where products are made, stored and shipped. The raw materials of the manufacturing process are generally stored on site (many times in an outside storage yard so as to not poach inside floor space) as well as the machinery that makes the products and the employees that operate the machinery and support the manufacturing process.

These buildings can be “freestanding” or parts of a larger building but typically have greater power feeds into the building, 10-30% of the total square footage in office space, ground-level loading doors vs. truck-high loading doors (some may have both), fenced outside storage areas and a warehouse clearance of 14 to 24 feet under-beam in the warehouse/plant area.

Because these locations typically have more office space, they also have more parking spaces — a minimum of two parking spaces per 1,000 square feet of building.

Manufacturers can generally operate in a building with lower ceiling height because their plant is consumed with machinery and raw materials vs. finished goods waiting to be shipped. Most products are made and delivered within days so as not to inventory a large amount of finished goods.

A distribution warehouse as described below will typically not fit a manufacturing requirement, but some distributors may be able to occupy a manufacturing building especially if the building is equipped with ground-level and truck-high loading.

Logistics warehouses

Logistics buildings used to be referred to as distribution warehouse buildings.

They generally are made of concrete (because of the wall height). Products are staged, stored and shipped from within their walls. Typically, no manufacturing or assembly is done on-site.

Consequently, fewer support staff and no raw materials are housed at the location. Logistics buildings require truck-high loading, warehouse clearance of a minimum of 24 feet and a truck-turning radius of 130 feet or more.

The ideal setup is a rectangular building with “cross-dock” loading so that the point from stored goods to loading doors is minimized. Because these buildings typically house fewer employees, the premium on office space and parking is lessened. These buildings normally have a parking ratio of one parking space per 1,000 square feet of building

Flex or flexible

The personal computer boom of the early- to mid-1980s gave birth to a new industry and consequently a new type of industrial building — the flex building, formerly called a research and development building.

Since computer companies employed a large number of skilled workers, the typical industrial building didn’t contain enough office space or enough parking for additional offices to be added.

Developers of R&D buildings created the “mezzanine second story” which enabled a smaller lot to accommodate a larger building. Silicon Valley in Northern California and the Irvine Spectrum are populated with these flex buildings.

Generally, these buildings are made of concrete and glass because they are modern and are occupied by a high-tech manufacturing or assembly group and a large employee count (engineering, accounting, purchasing, sales, sales support and customer service).

Parking, power, office percentage and layout are the important features within these buildings. These structures have three or four parking spaces per 1,000 square feet of building, and in some cases, can accommodate a use that requires 100% office.

Less important are loading, clear height in the warehouse and outside yard storage.

But, alas, our world is built on exceptions. This is true with locations as well. You may have some of the characteristics of all of the above in your location and it functions just fine. The above is true in the “classic” definition of the building types.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at [email protected] or 714.564.7104.

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