warehouse

What type of heating is best for an industrial warehouse?

This blog will focus only on the most popular types of heating in my market and in the golden horseshoe of Southern Ontario, natural gas is often available in most industrial real estate buildings. With that in mind, natural gas is preferred over electric heat sources due to the cost factor. Considering warehouses are large open spaces, what is the ideal way to heat them?

The two primary types of natural gas heating I find in a warehouse are either forced air or radiant tube. Forced air heaters usually hang close to the ceiling and kind of look like a large metal box with vents that blow hot air into a warehouse. Radiant tubes also typically hang close to the ceiling and are in fact long tubes that radiate heat onto the surfaces around it. The primary difference between the two is that one heats the air and the other heats surfaces, so in warehouse setting which is best?

While the answer may ultimately be a matter of preference or a requirement depending the materials a business handles, radiant is often the preferred heat source in a warehouse setting for a couple reasons:

1) If a grade level door or loading dock is opened hot air would escape very quickly, but, considering a radiant heat tube heats surfaces instead of air, people and contents will be more comfortable. This is a common concern for industrial businesses because opening bay doors is a regular occurrence to run the business. Depending on construction materials surfaces often absorb and reflect heat as well, further adding to indoor comfort even when cold air is coming in.

2) For reasons stated above it is often more cost efficient. A forced air heater will run more and struggle to maintain temperature every time a door is opened, and in a warehouse you can imagine the large cubic volume of air that needs to be re-heated as it regularly escapes. Radiant heaters don’t have that struggle.

Ultimately you as a tenant will need to determine the best type of heat for your business, but for those that get frustrated with large bills to heat a warehouse it might be worth considering radiant heat instead if you’re running forced air. It may not be the solution for everyone but it’s definitely worth exploring. If you’re willing to sign a long term lease, some landlords may consider changing the heat type for the right tenant, this could ultimately be negotiated into the lease.

Industrial Space for Lease in St. Catharines - 330 Vansickle Road #2

Industrial Space for Lease in St. Catharines - 330 Vansickle Road #2

Industrial space for lease in St. Catharines - 330 Vansickle Road #2. Unit consists of front showrooms, two washrooms, mezzanine, and warehouse with grade level door access and 18 ft. clear height.

Industrial Building for Lease in Beamsville - 4306 Bartlett Road

Welcome to building B at 4306 Bartlett Road in Beamsville, Ontario. The location is minutes from nearby highway access at QEW and Ontario Street, and, Beamsville is a great in between market for industrial or warehouse tenant’s that cater to both Niagara as well as Hamilton and GTA markets due to it’s proximity to both.

The building itself features a very wide grade level door, a common loading dock, and approximately 16 ft. clear height. The building is expected to be available for occupancy around October 1, 2019 after the current tenant vacates and the landlord can complete some work on the building.

Prior to occupancy the landlord plans to insulate the building, bring in a bathroom, and equip it with a 3 phase power supply. For tenant’s that don’t require some of those features or are willing to use common washrooms instead we can discuss some flexibility in the rental rate.

Industrial buildings for rent in Niagara this size with a loading dock really don’t last long on the open market, especially at these rental rates. It would be ideal to act quickly before someone else takes, space like this is in high demand. Contact me if you have questions or interest.

Why are Commercial, Industrial, and Office real estate leases so long?

“Why is this lease so long?”, “Is all of this wording really necessary?”

I get questions like this from either new businesses, or businesses that have come from a building that simply had a very relaxed leasing policy. More often than not, a relaxed leasing policy and short lease documents that lack detail cause problems.

A commercial real estate lease should be very detailed about the relationship between landlord and tenant. Not only should it contain important details about the deal such as lease term, start date, rental rates, size of premises, use, etc, but it also needs to have details about rules on the property, insurance requirements, types of action that can be taken in the event of a default, environmental responsibilities, and so on. The list is actually quite extensive for what can be contained in a commercial real estate lease which is why most documents are dozens of pages in length. My document often ends up between 30-35 pages depending on the tenant, building, landlord, type of lease, zoning, etc. While many tenant’s may think that’s a long document, I feel each point is necessary and would have difficulty shortening it. I would actually have an easier time finding content to add than take away.

Back to the questions, why are leases so long and is it necessary? If a tenant asks that question and I look at the building they’re in, I likely see issues such as poor maintenance, poor parking arrangements, structural issues, driveway pothole and access issues, and tenant conflicts. A properly written lease document that can address those issues and is enforced by the landlord and tenant ensures fewer issues for both parties. A lengthy lease should be considered as necessary by both parties because leases should be designed to protect the interests of both landlord and tenant. Yes, leases by default are naturally pro-landlord, but that’s because it’s their property. That doesn’t mean there isn’t or shouldn’t be protection for tenant’s so that is something you need to look for and ensure is in your lease. The landlord’s I represent take good care of their buildings because the lease requires them to. This allows the tenant’s to use the property as efficiently as possible to run their businesses, as long as they follow the rules with the other tenant’s. This is the ideal situation for everyone.

Every clause in my lease has a reason and my document is updated when new industry trends occur or new issues are discovered in the marketplace. Each clause has a purpose because at one point it was created to correct a problem or properly define something.

So is all that wording necessary? Absolutely. As long as it reflects the needs of your business and protects the interests of both parties, every clause should be seen as necessary and relevant. Make sure you are represented by a knowledgeable commercial real estate broker to ensure you get what you need from your lease.

What is a rent free period in a commercial or industrial real estate lease and how do you achieve one?

A commonly requested or negotiated item in commercial real estate leases is a rent free period. Depending on market conditions for the type of space or building you’re looking to lease you may be able to achieve one.

A rent free period is a defined period where the tenant does not pay rent either prior to their lease term or at the start of their lease term. How much rent free to ask for is usually dependent on market conditions and the reasons for needing a rent free period. For Example, an office or industrial tenant looking to build out a new floor plan of offices might need 2 months to complete the work at their cost, and in turn would ask if they could achieve two months rent free to make the transition smoother. A landlord might see this as a reasonable request dependent on market conditions and the length of the lease term.

Speaking of the lease term, a rent free period is usually not considered unless you are signing a longer term lease, which in current market conditions is usually around 5 years depending on the landlord, property, and the reasoning. If you are not prepared to offer a lengthy commitment, it would be wise to not request a rent free period as you would be seen as unrealistic. It would also be wise to not request too much rent free period for the same reason unless it’s a very unique deal that warrants it.

There are also different options for a rent free period. In the situation of a triple net lease for example, some landlord’s may only agree to giving base rent free, meaning the tenant would still pay their proportionate share of property expenses through TMI, CAM, or additional rent depending how the lease is worded (this is common practice and considered a reasonable request).

There is also the option of having a rent free early occupancy period or a rent free period at the beginning of the lease term. If your lease starts February 1, 2019 and you have one month rent free early occupancy, your rent free period would be for the month of January before your lease starts. If it is rent free within the lease, it would likely make February the month you have free. What is agreed is usually a matter of preference between landlord and tenant. For landlord’s, it’s usually more of an advantage to have rent free early occupancy because if you have a 5 year lease, you still get the full 5 year term whereas with rent free within lease, the beginning of the term is eaten up with the free period.

A rent free period is a common negotiating tool for commercial, industrial, and office building leases, but it has its limitations in many markets and not all landlord’s consider it. Because it’s an incentive there may also be a claw back clause in the lease for that incentive in the event the tenant defaults. If the landlord agrees to a rent free period it’s because they feel there is a legitimate reason for the timing of the request and that it benefits their long term big picture of their investment property.

In the current Niagara industrial market, in particular St. Catharines, space is tight so rent free incentives usually aren’t very long if considered. Rent free on a commercial retail space is dependent on building and scenario and office buildings usually have consideration for it if the tenant intends to do their own improvements and alterations to the space.

To make sure you’re getting the best advice on rent free incentives, make sure you’re speaking with a knowledgable commercial real estate broker for the market that you are in.

Are you an industrial tenant that can't find a building in Niagara?

If you’re an industrial tenant in St. Catharines or Niagara looking on commercial listing websites and noticing nothing with your criteria is coming up or if you’re calling real estate offices with similar results, that’s likely because there aren’t any… at the moment.

The best thing you can do is speak with a reputable commercial real estate broker and let them know what you are looking for and how long you can wait for it. I have conversations daily with tenant’s expressing this frustration, but, sometimes there is a solution if you talk to the right people. I have a database of properties that have leases coming due on the regular. Sometimes I have a creative solution. A conversation with the right commercial real estate broker can make a difference.

I had a conversation with an industrial tenant the other day discussing their timing and expansion options. I happened to make them aware of a building we can pursue in a few months with expansion options a year from now, an option he wouldn’t know about unless that conversation happened.

Right now I’m keeping tabs on the tenant’s looking and when availabilities come up I like to make them aware of it. If you want to be one of the tenant’s that benefits from opportunities that can be created by a commercial broker, please contact me. Don’t expect residential Realtor’s to be of the same level of assistance, their knowledge is usually limited to what is available right now, which isn’t much.

The difference between loading docks and grade level doors in industrial real estate.

I've heard tenant's and landlord's use grade level door and loading dock interchangeably as if they are the same thing. They are not.

Most industrial buildings, units, or space for lease contains a grade level door. It would be rare if a building wasn't equipped with one as they are a standard useful feature. A grade level door opens and closes down to the grade and if that sounds confusing just replace the word grade with ground. The door is level with both inside and outside ground so as you can easily move objects through in and out. Most times these doors are large enough for vehicles to drive through which is an important feature for many tenant's.

The loading dock is different in that the door is truck level and acts as a dock to safely move between building and truck trailer. A transport truck can back its trailer into a loading dock and when parked, it should be possible to enter the truck through the warehouse by flat surface. This makes it possible to load and unload goods quickly, especially with the use of a tow motor or fork lift. Unfortunately loading docks are in demand but have low supply, especially for industrial units under 10,000 sq ft. Compared to grade level doors a loading dock is not cheap or easy to install which is why they are more rare. A property needs to be able to handle truck access to back into a dock as well.

In St. Catharines and the Niagara region it is unfortunately difficult to find loading docks in our current supply of industrial buildings. While there are currently and abundance of grade level doors, it would be good if developers and building owners started recognizing the shortage of loading docks to ensure they are a more common feature for warehouse and distribution tenants needing to rent warehouse space with that feature.

What is TMI, CAM, and Additional Rent in Commercial Real Estate Leasing?

If you're new to commercial leasing you are likely surprised by the way most commercial, industrial, or office spaces are priced and marketed. Most commercial listings have the price broken down per sq. ft. and while that may be confusing in itself, what I find catches most people off guard is the mention of additional rent which is also commonly referred to as TMI (taxes, maintenance, insurance) or CAM (common area maintenance). It's often an overlooked detail in the hunt for commercial space because a new tenant may notice the base rent is within their budget but after discovering additional rent the space is not affordable.

So what is this additional rent? It's the landlord's expenses for the property.

What are the landlord's expenses? Property taxes are usually the most significant of this figure but it also includes but isn't limited to property insurance, landscaping, snow removal, waste removal, cleaning and maintaining common areas, building management and administration fees, and repair and maintenance for items like the roof, HVAC, etc.

Why is additional rent separated from the base rent? Keeping the base rent separated and priced per square foot makes it easy to compare against competing spaces to determine what is in line with market value, this benefits both landlord and tenant.

Why do tenants pay additional rent for the landlord's expenses? I've been asked this a few times as if this is a deceiving practice but it isn't. The tenant pays their proportionate share of the property expenses because it's the tenant's that use the property, not the landlord. The tenant's use the structure, the HVAC, the parking lot, the common areas etc. and those items need to be paid for and maintained. Logically it should be the party that uses it that pays for it and that is why the expenses to maintain the property paid for by the tenant usually through TMI.

How is TMI/additional rent calculated? In most scenarios the combined annual total for expenses is divided by the total number of square feet of the building. This provides the per square foot rate for expenses we call additional rent, AKA, TMI or CAM. This per sq. ft. figure is multiplied by the number of square feet that make up the tenant's premises and that is the annual total the tenant is responsible for paying as additional rent.

Does TMI change or increase? Yes. I mentioned above property taxes usually make up the bulk of additional rent and unfortunately property taxes have a tendency to increase regularly. In addition to this the cost of maintenance and repairs also change over time and will have an impact.

Is additional rent negotiable? No. Property expenses are not negotiable. They are what they are.

Have a question about additional rent that isn't in here? Let me know what it is.