Commercial real estate: 4 ways to avoid moving

Commercial real estate: 4 ways to avoid moving

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Today, I’ve got some advice for companies that have outgrown their current location but don’t want to move.

The reasons for not moving that I hear frequently are – moving is too expensive, I own the location, I have time to run on my lease, my rent is below market, I don’t want to take on additional fixed overhead in case business should decline, etc.

The fact remains, however, the company has outgrown their location and this creates operational headaches which lead to inefficiency and ultimately loss of profit. If your company finds itself in need of additional space and you don’t want to move, what should you do?

Before we delve into the solutions, let’s diagnose the problem, shall we? What are the reasons that you have outgrown your location? (Congratulations, by the way, this is a good problem to have as it often signals an increase in business).

Did your company secure a piece of business that cannot be fulfilled in your current location? Has the growth come organically through an increase in the industry? Did you add employees? Has the way in which you conduct your business changed? Have you acquired a competitor or another product line that must be folded into your operation? Have you purchased new machinery or processes that require additional space? Has one of your suppliers asked that you warehouse some of their product where before the product was dropped shipped directly to your customers? Have you brought a formerly outsourced function back into the operation?

The way in which you answer these questions may determine how we solve your space issue (and what type of space you need – production, warehouse, or office). So in no particular order, here are the suggestions that I make to companies -needing additional space – but who don’t want to (or cannot) move.

Here are some suggestions for you to consider which may solve the operational space needs while addressing the concerns outlined above.

Add additional office space to your location: On the surface, this appears to be an easy fix. Please consider the cost of the improvements ($45-$75 per square foot depending upon walls, plumbing, upgraded finishes, etc.). If you own the location you may be over improving your building for the market and this could affect future resale timing and pricing. If you lease your location, you will need the owner’s approval AND you will be leaving the improvements in the location if you move at the end of your lease. Some occupants have found great utility in modular furniture- flexible layouts and you take the furniture with you if you move. Other considerations are the city in which you operate (the improvements will have to be permitted) and the parking ratio. Generally, office space will require 4 parking spaces for every 1000 square feet of space. Most industrial buildings are parked 2 spaces per 1000 square feet (including office, production and warehouse). You may be limited as to the amount of office space you can add to an existing configuration.

Lease additional space nearby: Whether you own or lease your location, a temporary fix to your space needs may be accomplished by leasing space close by. The upside to this strategy is that the excess space (if the lease is flexible) can be discarded at the lease expiration (if space is no longer needed) or renewed until a more permanent solution can be achieved.

Use a third-party logistics company: Also known as a 3PL, these independent warehousing providers serve as an outsource for all of your warehousing needs. A third party logistics company provides a “soup to nuts” solution for additional warehousing. Included in the per pallet charge is warehousing, access, shipping and receiving, insurance, etc.

Go Vertical, Baby! Utilize cube by reworking your racking plan and purchasing a high reach forklift. Every time you narrow your aisles into a narrower aisle configuration, you gain approximately 33% increase in pallet storage density. By converting wide aisles to narrow aisles, you would increase storage density by 33 percent and moving from narrow aisles to very narrow, you save 33 percent. Of course, this increased storage capacity comes at the price of increased capital investment forklifts and pallet racking.

A quick and easy tip to help evaluate if you can increase your storage space in your current building is to stand at one corner of the warehouse and look out at the opposite corner. If you can see the opposite corner without obstructions, you likely have an opportunity to increase storage cube.