Building Your Own Warehouse or Office Building - Be Careful
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SO YOU WANT TO BUILD YOUR OWN WAREHOUSE OR OFFICE BUILDING?
Are you thinking - “Existing property prices are too high! I will build my own warehouse and save a bundle.” If I had a dime for every time we heard this from a client. Unfortunately for them, 99.9% of the time they will pay more, usually much more by taking the task on themselves.
Steel building companies advertise extensively and will throw out low pricing of the steel package for a building of say $10 or $15 PSF. This number sticks in the mind of the business owner and he thinks then that with the build out and the few extras, he can get in a new building for say $30 or $35 PSF. Experienced developers building very large, basic warehouses are hard pressed to get to those numbers. Why does it cost so much?…
The Structure and Interior Finish
Yes, you can get steel building packages for around $10 PSF. Then you will pay $5 to $7 PSF to have it erected. Oh wait; you need the concrete slab…that is another $6 - $8 PSF. Now you have a steel building, what about the exterior walls? Brick, tilt wall, stucco, block, some combination of the above? Add another $8 to $20 PSF of exterior wall - yes, height x width of each wall. You need office finish once the shell is complete. Now add $50 PSF + for the office area.
You may find a nice parcel for $2 PSF and think perfect, this is inexpensive. That is just the beginning. Unless the property is located in a master planed development, you will have to install detention to meet the local drainage district’s requirement for onsite storm water retention. This can eat up 15% of your property. Then you have to determine if the runoff from the detention can be natural gravity or will require a pump station.
Coverage is the amount of building area you can fit on your land parcel after taking into consideration building/parking setbacks, green space/landscaping/parking requirements, detention areas, access drives, storage yards, etc. If you can only get 25% coverage, then you for every dollar PSF you spend on land, you will have $4 PSF in the total finished building cost just for land.
Often overlooked are the fees associated with the design and engineering of a development. Even a simple small warehouse building requires civil engineering site design for drainage, slabs and access. Then an architect will design the buildings from the slab up, including the interior space design. These fees can run upwards of $5.00 PSF. Other soft costs include soil testing, lender required inspections, phase one environmental reports, appraisals, lender points on the loan, and much more.
Permitting and Impact Fees
Permitting fees are usually small compared to the overall project costs; however impact fees and connection or tap fees can be substantial. These are incurred when connecting to the local water and sewer provider’s main lines.
Your Time…What is it Worth?
The most overlooked cost associated with building your own facility is the opportunity cost of your time spent managing the project, learning from costly mistakes and tackling the learning curve. A qualified commercial broker can identify experienced contractors with a history of building your type of building and will have a proven track record with a long list of references. Get your broker involved before making costly mistakes. Have a question about your lease? Contact us for a free broker lease evaluation.
Looking for Warehouse, Office or other space in Houston or elsewhere?
Contact the WarehouseFinder.NET Broker Affiliate Network below.
Centermark Commercial Real Estate specializes in Industrial and Office in the Greater Houston area. CCRE is the exclusive affiliate broker for WarehouseFinder.NET in Houston, TX.
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