In my formative years in Texarkana, Arkansas, I played a fair amount of golf. You see, I was too slow and skinny to play football and found it difficult to create space under my sneakers – making basketball a non-starter, too.
We didn’t have the cool school sports of today such as lacrosse, swimming and volleyball. Who knows? I might have sucked at those as well.
Relegated to the golf course were my extracurricular sporting efforts. A saying during that time, “horses for courses,” became a part of my lexicon. It describes how certain golfers do well on specific golf courses while others languish. Jack Nicklaus won six Masters green jackets on one course while Lee Trevino never won at Augusta National. Weird.
You might be wondering, what the heck does any of this have to do with commercial real estate? Please indulge me as we play a round, figuratively speaking.
As described many times in this space, industrial occupants are either manufacturers, warehouse logistics providers or some combination. Think plastic injection molding, aerospace tooling and Ramen noodle producers. They all make a product.
Raw materials are received, a process is completed, the finished goods are temporarily stored, and out the door they go. Simple.
You may be thinking. Hmm, are the types of companies above manufacturers or warehouse logistics operations? After all, some things such as raw materials and finished items are stored and shipped. They are by definition manufacturers because something that enters – flour, oil, and water – exits differently, say, like Ramen noodles.
So with that context, what kind of “course” does this “horse” need in order to succeed?
Certainly, a building zoned for manufacturing, which is generally classified as M-1, M-2, light or heavy manufacturing or business park. Next, given the specific process undertaken such as the case of our Ramen guy, where and how (truck or rail) will things such as flour, oil, and water enter the plant?
Once in, will they be stored or thrust immediately into machinery? How will the enterprise deal with its layout? We’re making food. Can a dirty warehouse suffice or will we require a more sterile area?
Those large mixers, boilers, and cutters will require many amps of electricity.
Finally, will the finished food be temporarily warehoused or packed onto idling trucks? As you can appreciate, not every “course” will be suitable. So, critical things include power, appropriate zoning, layout conducive to food production, and adequate ways to get in and out. Less important are amenities such as the height of warehouse ceilings, fire protection for the high-piled commodities and massive truck courts.
Let’s now shift to our warehouse logistics operators. The easiest of the bunch to describe is Amazon, the Masters (sorry!) of supply chain distribution. Simply, all of the items you source, click and purchase from your device follow a similar path.
Someone – not Amazon – but like the manufacturers described above, makes something. In the case of a Kohler faucet, look to Wisconsin. A Kraus sink? China. A head of lettuce? The San Joaquin Valley. Then the gargantuan Amazon distribution center gets it, by ocean container or rail to truck, refrigerated or not, to its warehouse. Your online order is received, picked, packaged, boxed, labeled and shipped to your door. Boom.
I’ve over-simplified the entire supply chain, but you get the idea.
In order to efficiently house an Amazon warehouse, certain features are mandatory. Clearly zoning. Some cities limit truck traffic. Ooops. Can’t go there! Because of the volume of goods at intake, logistics types need a significant number of doors that can unload trucks. Now what?
Well, pile it up as high as possible inside. You’ll need to think about the stacking height and whether the stuff will burn. For example, our Kohler sink will not burn but our plastic bottles of shampoo will. Therefore, the fire department will have a say on the fire suppression used.
Even with all the prevention in place, an Amazon warehouse burned to the ground last year in Redlands.
Finally – and in an ideal setup – different doors capable of loading the orders onto departing trucks or vans. Less important? Power. Because production machines aren’t employed.
As if the amount of available inventory was not acutely lacking, now we understand why not every “course” fits the “horse.” This only limits supply further.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at email@example.com or 714.564.7104.
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