Factories, warehouses and industrial real estate

Joined March 2009
The post about a 7M sq ft building for indoor golf (which to be clear is completely insane) led me down the rabbit hole for a scaled down version that's actually opening. It will be a 174,000 sq ft Prologis warehouse in Nashville that will be a hybrid of simulators (for driver and long irons) and then chipping areas, sand bunkers and greens for short game. The company behind it, CityGolf, is planning to open a total of 8 of these. Here's how they describe it: "At CityGolf USA, we've brought the full game indoors. Eighteen walkable holes: you tee off, chip and putt out on real greens and walk to the next hole. — every shot tracked, every course rendered true — while real greens, real caddies, and real hospitality carry you the rest of the way." I am highly, highly (extra highly) skeptical of all these indoor recreation uses inside of industrial buildings (side note: pickleball's obituary is already being written) but I think this idea in particular might have legs.
Just had a guy ask me how much it would cost to lease 7M square feet of industrial space. I made the mistake of asking what he wanted it for. A full 18 hole indoor golf course. Told him if he wants to lose all of his money just open an indoor pickleball facility.
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I did a video on this as well. I pretty much say the exact same thing I've written about here already but please help a brother out my watching and commenting: youtu.be/C67fAz3s1cI
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Hands down one of the biggest differentiators in small bay industrial is whether or not the building is sprinklered. There are other considerations naturally (ceiling height, loading, power, office build out, etc) but sprinklers are often overlooked. And most vintage small bay inventory is un-sprinklered. Huge advantages though if it is sprinklered: - expanded usable storage heights (common to see - restrictions by fire code if not sprinklered) - expanded list of allowable tenancies - appeal to larger / corporate tenants - insurance savings - risk protection I'd toss out an anecdotal estimate that all things being equal a sprinkler system adds a ~10% rent premium. I did a chapter on sprinklers in my book and will post the full chapter below
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22 Sprinklers SPRINKLER SYSTEMS ARE CRITICAL for fire safety, designed to control or extinguish fires, minimize property damage, and ensure the safety of personnel. This chapter explores the different types of sprinkler systems, design considerations, and the importance of proper maintenance and testing. Here are the different types of sprinkler systems: ESFR (Early Suppression Fast Response) Systems Designed for high-challenge fires, such as in warehouses with high-piled storage. These systems release large volumes of water quickly to suppress fires early. ESFR systems are effective for high-pile storage without requiring in-rack sprinklers. Rapid fire suppression minimizes damage but has higher installation costs, and sufficient water supply and pressure are required. In-Rack Sprinkler Systems Installed directly within storage racks to provide localized fire suppression for high-rack storage areas. These systems offer additional protection in areas where overhead sprinklers may not provide adequate coverage. Note that the sprinklers can be obstructed by stored goods, requiring careful planning and maintenance. Wet Pipe Systems The most common type, where pipes are filled with water. When a fire triggers a sprinkler head, water is immediately discharged. Its simple design is reliable, cost-effective, and widely applicable. It’s not suitable for environments where pipes might freeze. Dry Pipe Systems Pipes are filled with pressurized air or nitrogen. Water is released into the pipes only when the system is activated by heat from a fire, which then discharges through the open sprinklers. This system is ideal for cold storage or environments where freezing is a concern. A trade-off is a slight delay in water discharge compared to wet pipe systems. Pre-Action Systems Similar to dry pipe systems but require two triggers (e.g., heat and smoke detection) before water is released, reducing the risk of accidental discharge. This reduces the chance of accidental activation but comes with a higher cost and more complexity. Deluge Systems All sprinkler heads are open, and when activated, water discharges from all heads simultaneously. Used in high-risk areas with highly flammable materials. It provides immediate and widespread coverage but requires a reliable and high-capacity water supply. Design Considerations · Storage Configuration: The height and type of storage racks, distance between racks, and type of materials stored impact the sprinkler design. High-pile and rack storage often require ESFR or in-rack systems. · Building Size and Layout: Larger buildings may require a combination of different sprinkler systems to ensure adequate coverage. · Fire Hazard Classification: Warehouses are classified based on the fire hazard level, from low to high hazard, depending on the materials stored (e.g., combustible, flammable, or non-combustible). This classification determines the density of sprinkler heads and the required water flow rate. Water Supply · Water Source: Sprinkler systems must be connected to a reliable water supply, such as municipal water systems or on-site water tanks. · Pressure and Flow Rate: Adequate water pressure and flow rate are crucial. Booster pumps may be required if the water supply lacks sufficient pressure. Maintenance and Testing · Regular Inspections: Sprinkler systems should be inspected regularly to ensure they are in working order. Inspections include checking for obstructions, leaks, and ensuring all components are operational. · Testing: Systems should undergo periodic testing, including water flow tests, alarm tests, and functional tests of sprinkler heads. · Compliance: Adhere to NFPA (National Fire Protection Association) standards, such as NFPA 13, for the design, installation, and maintenance of sprinkler systems. Common Issues and Troubleshooting Sprinkler systems can face several common issues such as corrosion, leaks, pipe blockage, and valve malfunctions. Regular inspections can help identify these issues early. Corrosion may occur due to moisture exposure or stagnant water in pipes, leading to leaks or blockage. Valves can malfunction due to debris or sediment accumulation. Prompt troubleshooting by trained professionals is essential to maintain system reliability and prevent costly failures. Sprinkler System Lifespan and Replacement Costs The lifespan of a sprinkler system varies depending on the type and maintenance quality. Wet pipe systems typically last 20–30 years with proper upkeep, while dry pipe systems may require more frequent maintenance due to corrosion from moisture and air exposure. ESFR systems and pre-action systems have similar longevity but involve higher upfront and maintenance costs. Replacement or significant maintenance costs can be substantial, often ranging from tens of thousands to several hundred thousand dollars, depending on system complexity and building size. Impact of Building Renovations and Layout Changes Building modifications, including changes in storage configurations or interior layouts, can significantly impact sprinkler system effectiveness and compliance. Alterations that affect storage height, rack placement, or the type of materials stored may necessitate system redesign, additional sprinkler heads, or even upgrading to a different type of sprinkler system. Such changes can be costly and must be carefully considered during planning to avoid unexpected expenditures and compliance issues. Fire Protection Challenges High-Rack Storage: The higher the storage racks, the more challenging it is to achieve effective sprinkler coverage. This often requires ESFR or in-rack systems. Mixed Commodities: Warehouses storing a combination of combustible and non-combustible materials pose unique challenges for sprinkler design. Cold Storage: Refrigerated warehouses typically require dry pipe or pre-action systems to prevent water from freezing in the pipes. Technological Advancements Integration with Fire Alarms and Smoke Detectors: Modern sprinkler systems can integrate with fire detection systems for enhanced response capabilities. Smart Sprinkler Systems: These systems offer real-time monitoring and remote management, allowing for quicker detection of issues and improved maintenance. Cost Considerations Installation Costs: The cost of a sprinkler system varies depending on the size of the facility, the type of system, and the fire hazard classification. Initial costs can be high but are often offset by reduced insurance premiums and risk mitigation. Retrofitting Older Buildings: Retrofitting older warehouses to meet modern fire safety standards can be costly but is essential for compliance and safety. Case Study A logistics company leased a large industrial facility previously used for dry storage. Unaware that their intended use—storing flammable materials—triggered stricter local fire safety regulations, they proceeded with their move. During the business license inspection, the local municipality identified the lack of an adequate sprinkler system as non-compliant with fire codes. The landlord refused to cover the expense of installing a sprinkler system, leaving the tenant solely responsible. Ultimately, the tenant had to invest a significant sum—exceeding $250,000—to install a new, compliant ESFR sprinkler system. This unexpected cost led to considerable financial strain and delays in operations, underscoring the critical importance of thoroughly understanding local regulations and ensuring clear responsibilities in lease agreements. Summary Sprinkler systems are vital for fire safety in industrial buildings, providing protection for both property and personnel. Selecting the appropriate system requires careful consideration of the building layout, storage configuration, and fire hazard classification. Regular maintenance, compliance with regulations, and integration with modern technologies ensure that these systems remain effective. Whether using wet pipe, ESFR, or in-rack systems, properly designed and maintained sprinkler systems are a cornerstone of warehouse safety and operational reliability.
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Just had a guy ask me how much it would cost to lease 7M square feet of industrial space. I made the mistake of asking what he wanted it for. A full 18 hole indoor golf course. Told him if he wants to lose all of his money just open an indoor pickleball facility.
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I did run through some high level numbers with him. He said it would need to be +60' high ceilings. Since this would be extremely rare it would need to be a custom build to suit. Would likely need to be 300 acres or so total, and with some basic assumptions on the cost to build I estimated $25 - $30 / sq ft gross (including operating level expenses). So on 7M sq ft he could expect around $15M per month in rent. That's if anyone would be dumb enough to actually build it in the first place.
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I'd love to see his revenue projections on it as well as other expense line items. Year round golf with no weather delays sound appealing but I think this is truly the only business case for a an industrial building worse than pickleball.
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Thanks @lucashd for the shout out! Coincidentally I'm working on getting a paperback out as there seems to be some delays with shipping on Amazon.
Highly recommend @ChadGriffiths book Ran out of sticky notes when reading it
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This is exactly why a second set of eyes on a lease is important
Replying to @ChadGriffiths
2nd Draft: The Premises shall be used to operate a ginormous, sketchy-ass indoor swimming pool for purposes of insurance fraud, structural deterioration, destruction of neighboring tenant operations and all other water-related activities the Landlord shall regret permitting.
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I can't say with any degree of certainty that there isn't an underground shark fighting ring operating after hours. ... and it did sort of smell like cheap corn ....
Replying to @ChadGriffiths
wrong answers only: - underground shark fighting ring - warehouse low budget corn
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Why, might you ask, is there a giant pool in this small bay? Will see if someone can guess before answering.
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It's roughly 17,000 gallons / 65,000 liters
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A corollary to the importance of parking is to also consider access to public transportation. Developers and company owners aren't likely to take the bus to the building so subsequently it's often not factored in. But if the business has employees who do rely on public transportation (or expect to hire employees in the future who will) this alone can be a determining factor on where an employee will choose to work. Consider two companies looking to hire the same employee where one location has good and quick accessibility while the other does not. All things being equal the employee will undeniably choose the one with the easiest commute. Access to public transportation is actually one of the main things to consider if you are looking at a building outside of a main commercial / industrial area (ie/ tucked away deep in an industrial park or in a small town). Perhaps all employees will have their own vehicles (or expect to be driven by autonomous robotaxis in the future 🤖) but it's still prudent to at least consider it during the site selection process. Parking and public transportation are two very worthy considerations when looking at any type of real estate.
Parking is one of the least considered, yet most important, factors in industrial real estate. Or real estate of any kind for that matter.
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Parking is one of the least considered, yet most important, factors in industrial real estate. Or real estate of any kind for that matter.
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I absolutely can't be trusted with a drone.
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Was just trying to make a simple video about how gigantic Elon Musk's TERAFAB will be. See the 19 second video showing just how many golf courses can fit under its one single roof 🤯 youtube.com/shorts/7Tioi0978…
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Was speaking with a site selection expert in Mexico this morning and he had a great comment: "The cheapest real estate is often the most expensive operation". Doesn't necessarily apply to retail or office but it is such a beautifully succinct way of describing industrial. Yes, you might be able to get a cheap property or piece of land, but what happens when you have to account for increased transportation costs, strained labor, or any other number of input costs that may go up as a result? The cheapest real estate is often the most expensive operation. Pure gold.
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Spotted in the wild yesterday. Shows one of the most common challenges in industrial where a building often has either dock loading or grade loading (in this case it's only grade / drive-in). When a delivery requires a 53' trailer and semi, not only can the contents not be offloaded at the same height as the back of the truck (dock loading is deliberately 48" off the ground for this exact reason) but loading areas are not commonly designed to handle the semi's size in the first place. The most common work around is to back the truck beside the building and then load / offload via forklift. Some main issues that arise: - Goods are exposed to weather (not yesterday obviously but imagine if it was raining) - It can take an extra person inside the trailer to move pallets around so the forklift operator can move them around outside. - it clogs the parking area for other tenants Probably other issues too, let me know if I missed any major ones. It's not to say this scenario is bad as this particular tenant might only have sporadic deliveries involving a semi so they might require the grade loading the majority of the time. Just something very, very important to identify as earlyl in the process as possible. I also added a banging sound track for you entertainment.
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Things you don’t see every day. This warehouse has a secret door leading to the office.
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The office itself also has a secret door
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