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How to Use Intricate Local Knowledge to Protect Your Clients During a Site Selection Process

 

New Jersey is a very difficult market in which to be an effective industrial real estate broker. Not only is there tremendous competition from other brokers, some landlords are pushing to do deals directly with users, and a lack of inventory compounds all the other issues we come across daily. We service a heavy industrial market here in New Jersey where we are home to the second largest port in the United States, and we also have the largest population and most diverse demographics that create a scale of consumption that is unpatrolled. The New York metropolitan area is the largest consumer of durable and non-durable goods anywhere in the free world, so how can a broker stand out from the other large brokerage firms? The answer is simple, and that is to gain as much market knowledge as possible combined with an educated understanding of what your client is looking for.  Many business owners, building users, and corporate site selection committees are not looking for a broker to simply run to the office and send over a 60-page report with 100 buildings from which to select.  As brokers we have a responsibility to look after our clients’ fiduciary health, and time is money.

First, we need to consider the business that our client or prospective client is in and take some time to view their website and do some research into the key executives, and especially why they want to be here.  Most companies shopping for warehouse space in New Jersey, or just about any port market, are in the business of importing or exporting goods to the various ports in Newark, Elizabeth, Jersey City, Staten Island and even Camden and Philadelphia. This is a great place to start your research and figure out firstly, how much space they are looking for, and follow that up with finding out the volume of container traffic that is forecasted annually.  Even if this is the only intelligence you can gather, you have enough at hand to make an educated selection of 3 to 6 buildings that would best fit that particular client.  Please refer to the examples below.

Client #1 is a pillow importer called Sleep Well, Inc.

Sleep Well, Inc.’s current base of import and distribution of bedding products is in Columbus, Ohio, which is not the best location for an importer of goods made in the far east and Asian Subcontinent. However, this is an opportunity for the broker to shine.  Just knowing that this corporation is likely paying a $3.00 to $4.00 net rent in Ohio, and rent in New Jersey will most likely be more than double or triple, it is our job as brokers to justify the realities of total freight cost.

Here is what we know from our research:

  • The need is for a distribution center at approximately 120,000 SF.
  • Sleep Well, Inc. imports roughly 8,000 TEU’S (40-FT equivalent unit or more commonly known as a 40′ container) annually.
  • The client needs to hire an office and management staff of 8 people and 30 warehouse laborers.
  • Sales forecasts created by years of collecting shipping and order data suggest a heavy flow of shipments moving to the south.
  • The client has his heart set on a 125,000-SF building in Philipsburg that has only 3 dock doors, and a 16′ ceiling height with an inferior fire suppression system for $4.00 PSF NNN.

Can you see where you can make suggestions?

#1 issue

Labor is very scarce in that area of the state and any labor one might obtain will be substandard, and that goes for the office help as well.

#2 issue

The client is an importer of bedding products that are very light commodities. A newer class A or class B warehouse with 32′ ceilings would gain huge savings by reducing the footprint needed to 70,000-SF by racking and implementing a robust WMS.

#3 HUGE issue

Many brokers won’t have the background to know the current drayage rates and trends, but find a reliable resource who can help with this.

Costs for Philipsburg Operation

  1. Since labor is scarce in this area of the state, the client will likely pay almost 20% to 25% more for labor with much less productivity.
  2. He wants a low celling height warehouse at only 16′ with an inferior fire suppression system so he will only be able to stack 2 pallets high, driving down profits and creating an unsafe environment.
  3. Drayage into the Phillipsburg area today are running anywhere between $650 to $800 per container, depending on its origin, so container’s annual cost prior to chassis fees, fuel surcharge and warfing will be about $5,800,000.00 alone just for drayage!

If we assume the client can get the building for $4.00 PSF NNN with a $2.00 tax and CAM fee, his rent would be $720,000.00 annually. If we take the rent and the drayage alone, you are well over $6,520,000.00 in several fixed costs, and this knowledge is power.

Active Prospective Building

  • 81,000 SF with 32′ celling height, ample parking in Linden and very nice. The asking price is $7.75 PSF NNN plus $2.50 tax & CAM = $830,250.00 annually
  • Drayage to Linden, NJ is roughly $280 per container with the total of $2,240,000

Total fixed costs           $3,070,250.00

Phillipsburg costing       $6,520,000.00

Linden costing              $3,070,250.00

Total annual savings      $3,449,750.00

The sole purpose for this article is to give users an idea of how valuable a broker is in finding the right deals, and the right requirements. I hope that brokers put some thought into what the clients need and if they are new to the area, or just don’t understand this market place, to make an effort to be of complete service to their clients, and not only for the broker as an individual but to always put the clients and their company first.  You may not be able to talk every client into a better situation, but I truly believe if you put your clients’ needs FIRST and do anything you can for them, you will see continuous business for yourself and the company. You will also have the satisfaction of using your training and expertise to make a successful company into a greater asset to the business world.

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