For most companies and their operations, it’s anyone’s guess how much space they actually need to lease. The reality is that most navigating their options alone end up either paying for space they don’t use, or leasing a space too small and inflexible to accommodate their future growth.
“Right-sizing” is the process of converting something to an appropriate and optimum size. While many have heard of right-sizing when it comes to personnel and equipment, the principle applies (and perhaps most importantly!) to your real estate.
Here’s some tips to right-size your industrial leased space:
1. Rationalize Your Locations
Do you need to be located in that specific market? Could you save money and improve the skills pool by consolidating locations? Are your locations close to your workers and accessible by customers/suppliers? Is your space flexible enough to support long-term growth? Ask yourself these questions; you’ll be amazed what new strategies could emerge.
2. Calculate Your Options
There’s plenty of financial models that can quantify the long-term pros and cons of your different options such as lease renewal, relocation, consolidation, etc. Always remain open to the possibilities and frequently check back in with the numbers to see what makes sense when your current leases approach their expiry
3. Closely Evaluate Your Space Usage
If you signed your lease three years ago, you’ll appreciate that technology has advanced, sustainable processes have gain popularity and it all changes the way you do business. Chances are there’s now a new way to increase density, reduce costs and sky-rocket productivity. Is your current space suitable and optimized to accommodate these changes?
4. Evaluate each space’s structural makeup:
Industrial space is rarely just a wide open warehouse. In order to accommodate your workflows, storage and movements of goods and people, you’ll need to consider everything from ceilings heights and column widths to any current mezzanine office spaces (or any plans you have to build one). For example, if you plan to increase your racking system from 14ft to 18ft, your current space may fall foul of tightened sprinkler and fire regulations, which requires you to find a new space with higher ceilings. But then, will that space’s columns allow you to actually install your racking infrastructure? It’s all food for thought.
5. Dispose of Surplus Space
If you’ve found yourself sitting on (and paying for!) 1,000 square feet you never use, consider releasing it back to your landlord when you renew your lease. Alternatively, take a look at other space options, especially bearing in mind all other considerations we’ve already mentioned.
6. Look Up!
Remember that you’re being charged by the “flat” square foot and not by height. By adding a third rack in your warehouse you can rent a space 30% smaller in footprint and pocket the savings; just make sure the ceiling is high enough! Equally, consider a mezzanine office above your warehouse, rather than paying for extra square footage at ground level.
7. Consider Relocating
Forget the hassle of having to move – relocating can bring you closer to your customer and supply base, reduce labour costs, unleash new sustainable benefits and ensure your company’s space is fully optimized. Many companies find that a better location can rapidly improve their supply chain and drive everything from revenue growth and improved logistics to dramatically improving shareholder value.
Your industrial real estate should always be evolving, and complacency can be dangerous. By making the right decisions and always keeping on top of how your space complements your organization’s growth and processes, you’ll be perfectly positioned to win in your market.
James Collins, located in Cushman & Wakefield Atlantic’s Halifax Office, assists clients with all matters relating to industrial sales and leasing. James offers all industrial tenants a free lease review service, providing feedback and market information to assist in formulating a lease renewal plan, with no obligation.