Weak Commercial Real Estate Market Means Time is Ripe for Warehouses and Distribution Centers to Save on Rent
Throughout the nation, rental rates for distribution and warehouse space are falling, while vacancies are rising. That leaves landlords looking to make a deal.
(Boonton, NJ, March 4, 2010) The Great Recession clearly has created a tenant's market. According to real estate firm NAI Global, the national average vacancy rate for bulk warehouse space topped 11.1 percent in 2009, the highest level in five years. Meanwhile, the national average rental rate dipped 1.3 percent to $4.57 per square foot.
That means it's the perfect time to analyze your real estate needs, says Tim Feemster in the March issue of industry newsletter Distribution Center Management. Feemster is director of global logistics at Grubb & Ellis and also president of the Warehousing Education and Research Council.
"This is a great opportunity to do what we call blend and extend leases," Feemster says. "Even with as much as two years left on a lease, you can make a deal."
Thinking of shopping around for a better deal on real estate? Some factors to consider:
- Is it time? If you've plunked down a large investment in space or equipment in the past few years, it's probably best to sit on your hands. But if your lease is almost up or your business has changed, start hunting for bargains.
- Discounts can be deeper for some. If you need specialized space or a large amount of space, your bargaining power might be limited.
- Trade up. Take advantage of lower rates to move from Class C to Class B space for the same price or less. The newer space is likely to boast higher ceilings and better sprinkler systems.
- Remember the big picture. It's not just about the space. Consider transportation costs, staffing, and other issues.
About the Distribution Group
For more than 40 years, Distribution Group publications have helped distribution center and warehouse managers increase productivity, cut costs, and meet increasing customer demands. Distribution Group publishes Distribution Center Management newsletter, books and reports, and a free e-newsletter.