Warehouse Buzz Words (Part 2)

If you currently invest or are considering investing in warehouses, here are a couple more warehouse buzz words you should familiarize yourself with.

Three-Phase

This type of building is also called three-phase electric, heavy-duty electric, or heavy electric. For instance, your house dryer has a three-wire electrical connection and is considered heavy electric equipment.

If your building is three-phase, it's worth some money because it increases the universe of potential tenants who can house their business there. It doesn't necessarily bring in more rent, but more potential tenants, specifically those who have large machinery and equipment that three-phase electric is needed to run efficiently. Your three-phase will provide less expensive and more efficient electricity to your tenants. Heavy electric becomes a very important issue for people who are running a lot of manufacturing type equipment that draws a lot of electric power. In many cases, all they will rent is space that has three-phase power so for attracting them as tenants it's a huge deal if you have it, and a deal breaker if you don't.

Usually commercial buildings are priced on the number of dollars per square foot. That's what you are buying. So, if you are going to buy one, it might not cost any more to buy one that has three-phase, as opposed to buying one that is only two-phase. So judge your acquisition preferences accordingly, and increase the potential number of tenants who can/will rent from you when you get a three-phase building.

Tip: To determine if the building is three-phase, look at the power box. Where the power runs from the junction box to the building, in most power boxes, you'll see three wires-black, white, and ground. With three-phase, you will see four wires. The extra wire tells you that it's three-phase.

Sprinklers

Yes Sprinklers. You must mostly think of these for a residential property but this is a warehouse buzz word as well. Sprinklers are becoming more and more important. If you are considering buying a commercial building for a relatively inexpensive price, the reason for the low price may be that it doesn't have sprinklers. Sprinkler systems are generally required by code on most new construction over a certain size and for distinct usage, which also increases the universe of tenants. Insurance is more expensive, if you don't have sprinklers. One question that agents ask when insuring any kind of commercial property is whether the property has alarms and sprinklers.

Tip: Some tenants won't rent an un-sprinkled facility, because they cannot get insurance required by the nature of their business. The approximate cost to install sprinklers after it has been built is about $3.00 a square foot. So, if you own a 10,000 square feet building that needs sprinklers, you are probably looking at about $30,000. That is a big hit on a modest-sized building. During construction, it probably costs less than a $1.00 per square foot to install sprinklers. Compare that to the $3.00 charge after it has been built- which is a significant difference.

Here's the real deal, if you're looking to buy a commercial building, it would be in your best interests not to buy one that wasn't sprinkled. If you do, you will be severely limiting the potential population of tenants who have the ability to rent your building, and setting yourself up for a big cost in the future to upgrade to sprinklers.

There are other problems properties can have that are more easily fixed and worth the risks and costs, and you can get those at a discount instead of ones that don't have sprinklers.

Stay tuned for upcoming articles with more "Warehouse Buzz Words" you'll want to know.

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