In the March 2005 issue, we discussed the importance of establishing the optimal distribution center network. I am sure it was one of your favorites. As a refresher, network analysis is an analytical modeling process intended to quantify the number of facilities that a company needs, and in which locations, to satisfy its customer service requirements at the lowest logistics cost.

Because there are so many variables to consider during the network modeling process, it is not feasible to evaluate locations down to the site or building level. Network modeling typically compares general locations, down to a 50- to 100-mile radius, based on transportation and facility costs (fixed and variable). Once the quantity and general locations of distribution center(s) have been defined, two paths can be taken; a site selection project or a real estate search.

For large distribution centers requiring a significant capital investment and a large number of employees, it makes sense to undertake an in-depth site selection project. We will discuss this process in our next article. For most, the capital investment and labor requirements are not large enough to justify a site selection project. Therefore, a real estate search is a logical next step in these instances.

Although I am not a real estate professional, my career has afforded me the opportunity to work on a daily basis with some of the most talented and committed industrial real estate brokers in the industry. The reason I say this is to set the stage for this article ... find a talented industrial real estate broker to assist you with your real estate transaction. Although some companies will choose to “self perform” the real estate process, most companies can benefit greatly from a broker’s knowledge of market trends, industrial development activities, construction and lease costs, labor costs and availability and other operating factors which go into this decision-making process. The local knowledge brought by a broker is critical.

Allow me to repeat something you just read: Find a talented industrial real estate broker. How do you do this? One way is to put together a Request for Information to well-known brokerage companies and go through an intensive interview process. Another method is to ask your network of contacts if anyone knows of a talented broker who can assist you. Whatever method you choose, it is important that you create a framework for evaluating your broker. Cushman & Wakefield, a leading global real estate service provider, recently polled several of its top clients in an effort to better understand what clients expect to see from their real estate service providers in the coming years. Its 2004 Achievement Conference Voice of the Client Panel provided some of the answers (see sidebar).

Once you have selected a broker who meets the attributes listed above, you should look to your broker to provide tactical implementation services for this stage of the project. With their market knowledge, the broker should survey the market for potential occupancy scenarios. This should include, but not be limited to, conducting exhaustive market surveys, leveraging external resources and relationships, analyzing forecasted opportunities, and presenting specific recommendations.

The broker also will be instrumental in selecting and inspecting the most qualified sites or existing facilities. Specifically, the broker should review available location; inspect alternatives; and examine zoning/permit factors, tax implications, environmental and utility regulations. The broker should gather this information and participate in the financial analysis, examine infrastructures/technical issues, investigate ownership and recommend the most qualified sites or properties.

As the choice of sites or facilities narrows, the broker is instrumental during negotiations. This process begins by submitting request-for-proposal documents to candidate landlords. The broker should take the lead in analyzing responses for operational and financial considerations, narrowing the list of alternatives, tailoring real estate negotiating strategies, selecting the final property, drawing up final terms and conditions, and reviewing and negotiating the final agreement with the landlord or land owner. The financial considerations can be the most critical element in many organizations. The broker should provide financial structuring options including lease, buy, sale/leaseback and debt financing and their associated cost implications.

After the property is under contract, the services from your broker should not cease. The broker should provide ongoing service and maintenance. This service should come in the form of preparing lease abstracts, monitoring lease provisions and requirements, reviewing yearly escalation calculations and general conditions, and assessing and refining methodologies for cost containment.

You can see that the right decision goes well beyond “the deal.” The right broker should be a service provider and trusted adviser. BI

Ned Bauhof’s “beverage team” has executed more than 100 projects in 85 locations in 10 countries. Ned is a principal with York, Pa.-based St. Onge Co., a material handling and logistics consulting firm specializing in the planning, engineering and implementation of advanced material handling, information and control systems supporting logistics, manufacturing and distribution since 1983 (www.stonge.com). Ned can be reached at 717/840-8181 or by email at NedBauhof@stonge.com.

According to Cushman & Wakefield, a leading global real estate service provider, clients expect their real estate professionals to have the following qualities:

The ability to integrate the broker into the company’s platform and workflow.

A broker who will share best practices.

A broker who will learn about the company and its business inside and out.

A broker who will sit side by side with the company at the strategy table.

A broker who helps drive strategy development.

A broker who works with the corporate real estate department to get and maintain a seat at the table in order to interface with the com- pany’s business and departmental leaders.

A broker who helps the corporate real estate department to integrate more closely with the Mergers & Acquisitions department (to get to the table earlier in order to anticipate/guide the deals, when appropriate).

A broker with demonstrable integrity and good values.

A broker who is flexible and agile, helping the company to change and adjust as the industry and market demands.

A broker who is not entirely transaction-driven.