While the benefits of renting modern industrial and warehouse space are many, there are some situations where renting an older or refurbished building also makes sense. The decision ultimately comes down to the tenant’s specific requirements, market availability and outcomes they hope to achieve.
Comment published in Logistika magazine, 3/20
In spite of being less efficient than modern buildings, location and availability are often leading factors to why older buildings are chosen over modern buildings. For example, new buildings in popular locations may be fully leased or not meet the timing requirements of the potential tenant. In another scenario there may be locations where modern buildings are not yet available, leaving older buildings as the only alternative. This could be in remote rural locations or in specific city locations where it is either not possible to build modern industrial buildings or cost prohibitive. Fortunately, modern buildings are becoming available in more locations across the country as developers and landlords expand their offerings.
Another reason for renting older buildings is they may have more attractive commercial conditions than some modern leased buildings, at least on the surface. Because the older buildings are already standing for many years and are often not to the higher standard of modern buildings, landlords are not able to ask for higher rents and will settle for shorter or temporary lease lengths. While this may meet the requirements of some, caution is urged because older buildings often allow for less efficient operation due to layout, more costly heating and lighting, as well as more repairs to the building and machinery than with in modern buildings.
Additionally, tenants sometimes prefer older buildings due to technical specification. While older buildings tend to be less flexible than modern buildings, to a smaller portion of tenants, they can more closely meet their requirements with features such as mezzanine storage, lower ceilings for bus bars, higher proportion of outdoor parking and storage or even permitting that can make newer alternatives harder or more costly to obtain. Also, some operators will simply not benefit from the features of modern warehouses because they may not need heated, well lit or insulated buildings.
In the end, no two tenants are exactly the same, and ultimately it is up to them to decide what is best for their situation.