Friday, November 14, 2014

5 Reasons you SHOULD operate from multiple #CRE locations

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I have written exhaustively and taped videos on the reasons that companies relocate. Without a doubt, the number one reason that I see which forces a relocation is...operating from more than one space. There is no question that operating in numerous physical locations (not different markets, btw) is inefficient, costly, and counter productive...but it occurs many times to house a fast growing company as it muscles out of its existing confines.

I found myself yesterday advising an occupant to consider operating out of two locations as a solution to his growth projections...which spurred my thinking. Just when does that strategy make sense? In other words, when SHOULD an occupant consider operating out of multiple locations?

The reasons, in no particular order are enumerated below:

There ARE no other alternatives. Currently (example above), we have an occupant that we represent in the plastic injection molding business. Their current facility has 600 amps of power. They just bought a  machine that draws 590 amps of power at start up. Upgrading the power panel will cost $100,000...a cost he is unwilling to bear in someone else's building. Additionally, he wants to be within fifteen minute of home. With 97 of every 100 buildings occupied in Orange County, we are REALLY struggling to find expansion space. We may have to lease a secondary building temporarily to stem the flow until a long term solution can be located.

The real estate structure WON'T allow any other way to grow. I have seen this countless times when an occupant owns his building OR the occupant has substantially improved a leased location to the point where moving becomes cost prohibitive. If this situation occurs, growth may be accommodated by leasing overflow space close by.

The operation is easily segmented. Several years ago we represented a packaging distribution company in their search for a building to house sales, design, engineering, and distribution. They wanted to own. The sales and design portion of their business catered to a high end image was important. We struggled to find the right fit of image and function since we were trying to find a class A office location for the design portion bolted onto a warehouse for the distribution piece. We solved the problem by selling them an office building close to home for sales, design, and engineering and leased them warehouse space for the distribution component.

An acquisition of a competitor. If a competitor is acquired, generally there is excess real estate. I wrote about this a couple of weeks ago. You can read that post here. We advise blending the cultures first and then figure out the real estate equation.

A portion of the operation MUST be segmented. Paint booths, H-2 rooms, fiberglass operation, plating machinery, foundries, etc. can ALL benefit from being separated from the entire operation.

So there you have it! Everything is not ALWAYS as it seems and sometimes operating out of multiple locations can make sense.

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