Category Archives: Business

Industrial Property

Industrial property is an entry point for many property investors into the commercial property industry. As a type of property, industrial property is relatively easy with a little complexity. Property owners only need to target and strategize the following problems when looking for property to buy:

  • Stable tenants
  • Achievable rentals
  • Good property location
  • Industrial property precinct
  • Growth of the local community and business sector
  • Vibrant industrial community supplying services, products, and raw materials
  • Access to transport links, ports, airports, and railheads

So now let’s look at the industrial property needed today by tenants.

What do Industrial Tenants Need?

Traditional warehouses will include quality height, size, loading and unloading facilities, quality office space to support industrial operations, ample car parking for staff and customers, hardstand areas for operational flexibility, and high levels of security to protect the tenant’s goods and their operation.

Industrial tenants today are far more sophisticated and demanding when it comes to selecting a property to lease or buy. The investor should therefore select a property that has all the elements of property usage that tenants expect in the local market. Tenants know that the property will impact operational costs and eventually the bottom line of their business. Tenants will choose their property well as a consequence.

Taking the First Step to Investment in Industrial Property

Industrial warehouses are simple to construct and have a long economic life hence the investor sees it as an entry-level investment vehicle and popular. Providing they select a sound and strong tenant, and apply a good lease, the stable future of the property for investors is normally achievable.

There is very little management required on industrial property, and as direct result many private investors will manage industrial property themselves. Unfortunately this does have negative connotations, in that the first time investor sometimes has little awareness of the specialist terms and operational conditions that is supported by lease documentation on their property.

These first time investors can then overlook critical matters and make mistakes. To the experienced commercial property specialist and commercial real estate agent, it is easy to see these ‘first time’ landlord managed properties as you drive through a town or city. The errors of ownership are visually obvious. These errors can even reflect in the ultimate levels of rent and price on the property.

Invariably and importantly this self management problem will surface at final sale or rent review time when the investor has overlooked something or transacted it incorrectly. The buyers of property today will conduct a due diligence period and investigation of any property prior to settlement.

Those property owners that manage their own investments should only do so only when and if they completely understand the complexity of the task at hand. If the investors have only a basic understanding of property performance and function, then they should not self manage the property. The matter is plain and simple.

Critical property knowledge will involve key functional elements such as:

  • Types of rental
  • The lease clauses and provisions
  • Property maintenance strategies
  • Property operational costs
  • Contractor management
  • Vacancy resolution and strategy
  • Incentive use and strategy
  • Tenant negotiation skills

A good property solicitor is invaluable when it comes to Investment Property. The same should be said for a property experienced accountant. Even the most basic industrial property needs carefully prepared lease documentation and financial guidance. It is interesting to note that many first time property investors will sometimes choose cheaper lease documentation that is ‘generic’ and available off the shelf. Cheap is not a good option when it comes to documentation in investment property. You get what you pay for and so why would you take this risk?

Given that you are endeavouring to protect and stabilize cash flow, a few dollars saved on lease documentation preparation at the start of any occupancy can eventually lead to property instability or downfall, loss of tenant, higher property operational costs, and uncertainty when it comes to exercising the critical terms and conditions of the document of lease.

A good property solicitor will understand the occupancy needs of the particular property and reflect that into the document used by the landlord to protect occupancy and cash flow. The same solicitor can create a standard lease document and strategy that targets the landlord’s cash flow plans and investment targets. You will not get this advantage from ‘generic’ leases.

Industrial Properties Outgoings Advantage

Many Investors seek to purchase and to lease industrial property to major industrial businesses under long term net leases. In long term net leases, these larger tenants would normally control and pay the property outgoings direct.

The property outgoings in an industrial property are normally simple although there is an essential checking process needed here to see that the tenant is correctly paying the outgoings in a timely fashion. In many circumstances and in this market, we have seen some tenants avoid the payment of outgoings without the full awareness of the landlord. This then creates unnecessary fines and legal disputes for outstanding outgoings accounts. The landlord must not assume that the tenant has discharged or paid the outgoings; the landlord can later find that the matter is still outstanding and about to go to court for non-payment. Rates and taxes (statutory charges) are usually a charge on the land and will ultimately fall on the landlord for payment.

So whilst this process of tenant paying outgoings direct is convenient and simple for the landlord, such leases have little substantial increase in rental return which may not necessarily support the investor’s growth plans. Investors of this ‘basic’ nature typically hold a number of properties of this type over the long term to allow them to achieve portfolio growth.

With industrial property it pays to recognise that the property may be uniquely and specially suited to a particular tenant. This means that the vacancy threat in industrial property must be carefully monitored as any lease reaches the end of term. It is not unusual for industrial property to remain vacant for a lengthy period in the current market.

Choosing a Suitable Contract Manufacturing Partner

The contract manufacturing business has witnessed a much higher growth rate compared to the market for the pharmaceutical or biopharmaceutical industry. Recently according to a contract manufacturing market research study, it was stated that the global market for contract manufacturing is expected to grow at a combined annual growth rate (CAGR) of 6.91 percent over the 2016-2020 period. The demand for this sector is quite large at the moment due to the effectiveness and benefits of expansion. People need to know these six tips to find the right manufacturing partner.

Need for a Manufacturing Partner

For people who are not ready to reach out to a contract manufacturer, do not feel left out as there are numerous firms which follow this path of ignorance. Small companies operate under cash constraints and possess narrow product development options. This makes marketing tough without the presence of a proper marketing department. Moreover, expansion into adjacent categories also become hazy adding to the number of obstacles. The need for finding a manufacturing partner comes into effect in order to solve this misery. The preferred partner would help you get over the dip and balance your production.

Planned Decision

The decision to select which manufacturer you will work with is counted as one of the most important decisions for your firm. This choice should be given stern importance or it might surely backfire. What can go wrong after you choose a wrong manufacturer? You can have production troubles as a result of poorly-maintained equipment or due to their priority for a larger customer population ahead of you. Also, process aberrations and operational slipups can be upsetting to your reputation in front of the customers. Above all, manufacturers can get trapped into raw material quality problems due to poor vendor management. Such issues might be a minor headache for a huge company, it can prove fatal to a startup which is struggling to acquire brand recognition.

Responsiveness

The next factor which should be taken into consideration is the manufacturer’s responsiveness. Do the contract manufacturers share the same sense of urgency as you do? Do they reply to your phone calls whenever you are in need at any time during the day? Apart from responding in a timely manner, would act flexibly when the unpredictable happens. You need to judge their presence and methods after entering a contract with your firm.

Who Are Their Customers?

– Always keep a tight check on the manufacturer’s current as well as past customers. Also, analyze have they worked with other customers in a similar fashion as they are to you, or is your firm the first of its type and size they are working with? Do they preserve customers for the long term? These are some questions which should be asked before making the knot too taut.

– Be wary of fixing business with such a manufacturer who isn’t happy to offer you a positive connection with other customers as part of active references. Do not hesitate, but ask for a list of the manufacturer’s past customers. Do not miss on the task to call their past customers and analyze the reason why they stopped doing business with your preferred manufacturer.

View the Total Landed Cost

While looking at the contract manufacturing market analysis, you must focus on the pricing of various manufacturers. This will give you a brief idea about the total cost which consists of different components such as the manufacturing fee, packaging/materials, ingredients, yield loss, storage and transportation.

You need to confirm that your manufacturing fee is all-inclusive and nothing more will be added in the later process. It is important to note that, the individual firm’s yield loss should permit around 3% on ingredients along with a percent or two linked to packaging materials. Moreover, also ensure that the total landed cost should include procurement, storage, waste disposal and quality assurance.

Look at the Team

Keep a note that an ideal manufacturer will manage an entire team which is full of well-informed competent people who are valued and well-respected in the company. Try to find out how long the employees been working with the company, and whether the company has acquired a good reputation in the concerned industry or not.