For two years now we’ve concentrated on shrinking -our fleets, our staff, our real estate holdings, our expectations. It’s time now to concentrate on growing.
Even if the fragile economic recovery takes an unfortunate detour for a while, the time is now to put in place the strategies for future prosperity. This is particularly the case when it comes to real estate decisions.
Trucking businesses relocate for a variety of reasons. Understanding the available options can be critical to business success as a great deal of money will be tied up in the decision.
Mark Cascagnette, vice-president, industrial, global supply chain solutions for Cushman and Wakefield, walked motor carrier executives through the available options at our recent Carrier Workshop, conducted in partnership with Dan Goodwill and Associates.
The first thing to remember is that real estate decisions often don’t get the attention they deserve, considering the costs involved. And when they do, not enough time is spent analyzing all the options available.
Giving yourself the luxury of time to make a decision by thinking about it far enough in advance (at least a year and a half) and arming yourself with information will make it easier to manage these costs.
There are also a few tricks of the trade it doesn’t hurt to know.
If you are looking to purchase a facility, you’re going to need anywhere from 10-40% cash down depending on the financial institution.
Choose this option in good times and you gain a competitive advantage with an efficient facility at a good price; go this route in bad times and the property becomes an anchor, limiting your options.
Prefer to buy land and build your own facility? It’s a very expensive and time-consuming option that can take the focus off your core competencies.
But it may be the only choice for specific asset classes such as cross-docks and transport terminals.
If you’re opting for a renewal on your facility, there are usually three, six or nine months’ written notice required and you will need to negotiate a new rate. Don’t neglect to complete an operating cost audit and ask for part of your deposit back.
When sublet options and/or market conditions are poor, a lease buyout may be ideal.
And remember you have help; landlords will buy out your lease to get you into their building for 10 years. Finding it more difficult to gain access to necessary credit? Consider the sell and lease-back option, a process whereby the owner and tenant sell a portion or all of the property to an investor and lease it back for five, 10, or 15 years.
It’s a great way for companies to extract cash out of real estate and redeploy it to other areas of the business, according to Cascagnette.