Warehouse Buzz Words (Part 1)

If you currently invest or are considering investing in warehouses, here are some warehouse buzz words you should familiarize yourself with.Dock HeightDock height is 48 inches, so tractor-trailers can back up into them and have the deck of the trailer level with the warehouse.However, for some types of businesses, you must have buildings with the right deck height or dock height access. Any kind of business that’s going to be running a lot of product through with tractor-trailers needs to have this access. So, if you are dealing with this kind of property, you should be aware of the market of tenants with whom you are potentially trying to work and their requirements—if they’re going to rent your property.Deck HeightDeck height, is 24 inches, half that of dock height. Your users will be pickup trucks like UPS vans, which are at deck height. If you were thinking about trying to market this type of property, it would be a good idea to have both deck height and dock height ramps available.Rail SpursA rail spur provides railroad access to your building, so that a particular company can have access to put railroad cars in there; they use a big loading ramp or dock with doors.Chicago is a major distribution center for many different types of businesses, so the rail spur is more important in a marketplace like Chicago than it is in one like Orlando. Most shipments in Orlando come by truck.Again, this is not information with which you need to be intimately familiar. However, you should be aware of this data, if you’re going to be investing in these kinds of warehouse properties. If you are investing in the Chicago area, a rail spur becomes very important.Tip: Each geographic area of the country may have unique or special markets like “rail spurs” for example, and therefore have unique specifications with which you should be familiar. Find commercial brokers in the specialized type of property you’re looking at to help guide your research before making any investment in properties of a type you don’t understand.IncubatorsThis is a warehouse buzz word you should definitely know.  An incubator building is temporary storage. The owner of the building is the incubator, who tries to incubate new tenants for a larger space to get more rent, which results in a higher rate of turnover. Many times, incubator owners own many other larger buildings.The typical incubator building is usually located within a commercial area. It’s often ‘junky’ looking and everybody who's a tenant there has about 800 to 1,500 square feet in the norm, There may be 30 or 40 units on the street side and possibly even more around the back.Although incubator buildings require maintenance, it’s usually a relatively low-level effort. Incubators do not maintain their buildings well. Most counties don’t like this type of commercial enterprise— not just because of the poor appearance, but as it may attract transient tenants. The biggest issue with these kinds of commercial buildings is insurance— particularly when you have businesses with dangerous equipment on site like auto body and auto repair. If you are going to be renting to that type of incubator, you’ll need to address those kinds of issues.The strategy in this type of commercial real estate is, “We’ll rent to you, as the owner of an auto body shop. You have a number of people who work for you and we’re hoping that your business will grow to the point where you will want to rent another 10,000 square feet over here in this other building, at much more money.”Incubators are usually cash cows, producing very heavy- duty cash flow. However, owners still try to grow tenants to move into other properties so that they can keep this property full. It’s easier to get tenants to come into the incubators.Stay tuned for upcoming article with more "Warehouse Buzz Words" you'll want to know.

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