Jon DeCesare, CEO/President, World Class Logistics Consulting, Inc. (Logistics Distribution Warehousing 2007)
In many meetings between tenants, brokers, and developers regarding warehouse site selection, the meeting does not achieve anyone's goals. Why is this so? It is usually because the potential tenant has an incomplete description of his warehouse site's logistical requirements; the developer/broker doesn't have comprehensive site logistical information to provide the potential tenant; and the brokers for both parties fail to note the inadequacies of the potential tenant's and industrial developer's information.
In the warehouse site selection process, the potential tenant, industrial developer, and their respective brokers have critical roles in communicating key information to the each other in order to select the best site. The industrial brokers should act as logistics information managers in the process. This role has become more critical in recent years with the outsourcing of corporate real estate functions, increasing need for fast-tracking the process, and increasing demands by potential tenant companies to conduct a comprehensive site location analysis considering the strategic and tactical competitive importance of selecting the optimum site/location.
Let's review the roles in information development that each plays and the key role that industrial brokers play as the logistics information managers.
Stephen Covey's best selling book, Seven Habits of Highly Successful People, listed one of the seven habits as, "Seek first to understand, then to be understood." This is clearly what the tenant's broker needs to do to start a successful site selection process. The broker needs to evaluate the tenant's immediate and future warehouse site selection needs. Also, the broker should gain an understanding of the tenant's business plan and how the warehouse network must support that plan.
The first step in a successful site selection process is for the potential tenant - with help from its broker - to develop a "Warehouse Site Selection Parameters Matrix." This matrix will list - in priority sequence - the key location parameters that are most important to that particular company, e.g., cost-effective, rail intermodal services; small parcel late pickup services; fiberoptic communication infrastructure; foreign-trade zone designation; etc. The site location parameters should be prioritized on 1-10 point scale, with a 10 being the most important. This will provide both the broker and developers of potential sites with a clear focus on which elements are most critical to the potential tenant.
Frequently this step is bypassed or inadequately completed, sometimes because the site selection is on a fast track. When a potential tenant fails to properly complete this step/process, we frequently see instances of the process taking much longer than necessary and/or an inferior site being selected. Therefore, prior to any meetings with developers, the tenant's broker should communicate the potential tenant's "Warehouse Site Selection Parameters Matrix" to the developer and its broker so they can confirm that the critical information will be addressed in their presentation and collateral material.
It is critical that the industrial developer's broker assist the industrial developer/landlord in translating a site/facility's features into specific benefits that a potential tenant requires. The marketing collateral material must be comprehensive enough to answer numerous questions that the potential tenant might ask. A "Site Fact Book," which answers many of the potential tenant's key questions and concerns about a site, is an effective business development tool and valuable resource guide for potential tenants. It is also important to develop a well-focused information packet because when a developer's information is too general or is misleading, tenants will fail to continue the proceedings.
It is recommended that the developer/landlord and its broker, for their part, develop a "Site Location Parameters Matrix," which outlines key parameters about the site. This form can be used in meetings with potential tenants to record the potential tenant's most important site location criteria and to make sure that the developer/landlord and broker explain all the pertinent information about their site. This matrix should list all the site location parameters, along with brief narratives next to each, and have space for listing the potential tenant's comments on each particular element. If the potential tenant does not bring up a certain element that the developer feels is a positive for the site, then the developer's team should point it out. After the meeting with the potential tenant, the developer and his broker can use the "Site Location Parameters Matrix" to discuss the required follow-up information and strategies.
When the developer is asked to prepare a proposal, the developer's broker - in his role as logistics information manager - should assist the developer to make sure that the proposal clearly addresses the potential tenant's most important site location parameters as well as pricing information. In our experience, we have seen far too many developers' proposals that fail to do an effective job explaining value as well as price.
If industrial brokers educate their tenants and obtain comprehensive site requirements information, and if developers' brokers assist their clients in preparing quality logistical information on their sites, the result will be to make sure that important logistical considerations are not overlooked. This can reduce the number of required meetings, elevate the quality of information exchange, and significantly increase the potential for providing the best site for the tenant, while providing a key competitive differentiator for the developer.
Jon DeCesare is CEO/President of World Class Logistics Consulting, Inc., a management consulting firm providing logistics, supply-chain management, and warehousing and distribution advisory services to major international corporations, third-party logistics providers, and real estate development and brokerage companies.
He can be contacted at (562) 435-2600 or by email.