Sucking Wind: What To Do With an Empty, Single User Warehouse in Today’s Market?

Written by smacke01 on February 10th, 2010

It’s truly amazing to think 4 years ago Palm Beach County had one of the lowest industrial vacancy rates in the nation at 2.3%.  Vacant industrial land was being rezoned to residential land to fuel the housing boom and the money was rolling in for the construction trades that typically occupy industrial buildings.  It was a double squeeze on the supply of industrial space driving the vacancy rate way down and the rents up.  When the housing market began its free fall, everything went with it, such as the construction trade businesses: electricians, plumbers, installers…and all the materials they work with and store in inventory: windows, countertops, flooring, doors, pavers, plumbing fixtures, etc, etc.

West Palm Beach

When all that goes, so goes the need for the building to store all that stuff, the good old industrial warehouse.  In Palm Beach County, the industrial vacancy rate hit 12% in 3rd Quarter of 2009.  From 2.3% to 12% vacancy in 4 short years!!!  No wonder all our heads are still spinning.  To put these vacancy rates in perspective, Palm Beach County has 50 million square feet of warehouses.  In the past four years, 5 million square feet has been vacated and is now sitting empty.  That’s a lot of sinks, bathtubs, and granite countertops that are no longer being stored.

This all brings to us to the main purpose of this post.  With all that vacant warehouse space out there, how do I get my empty, single user warehouse back on-line?

It is no secret that the 10,000sf – 20,000sf users are few and far between these days.  What do you do if you own one of these single user warehouses that was designed and built for one company and that one company is gone?  If you are tired of your building sitting vacant, waiting for that perfect user, its time to get proactive about getting your building back on-line.

The main thing to consider is trying to subdivide the space into smaller units.  Everybody is downsizing and you need to as well.  Downsize your space by dividing it   into smaller units.  This will take some work and each building is different, but the point being, there are twice as many tenants looking for 5,000sf than there is for tenants looking for 10,000sf.  If you can snag one of the tenants looking for 5,000sf, then half the problem is solved.  There are some costs involved with modifying a building for multiple tenants such as splitting up the electric and additional interior build-outs.  The market has contracted drastically and if you want to adjust with the market, it’s time to consider spending the money and modifying your building for multiple tenants.

Empty Warehouse

The market is purely driven on price right now.  Cheap and free rent is the main factor in luring tenants away from their existing locations, where that landlord is offering great deals as well.  It’s very important to know your immediate submarket.  What’s the guy across the street offering?  How much free rent and at what rate?  The days of sitting in your office and taking prospect calls is over.  You have to get out there and hunt these tenants down.

It’s a new day out there and that day consists of being proactive about doing the necessary things to get your building back in the game. The economy is not bouncing back any time soon and just because you saved your money and bought a building doesn’t mean it comes with a paying tenant.  You have to get out there and find that tenant, or those two tenants, or three tenants.  You have to spend some money to divide your building; you have to chase down those companies looking for a new location.  No matter what somebody else says, a half filled building at half the old rent is better than an empty with no rent!

Palm Beach County Industrial Vacancy Rate 2009

*Compliments CBRE

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This entry was posted on Wednesday, February 10th, 2010 at 7:50 pm and is filed under Industrial Market Conditions, Owners, Warehouse Space. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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