Built-To-Suit Warehouses are on the Rise, why Purpose built Warehouses and Factories make sense for Businesses

7 July  2022

Craigieburn acquisition, Victoria

As e-commerce demand continues to grow, built-to-suit warehouses are becoming more and more popular. But what is a built-to-suit warehouse and why are they so valuable for e-commerce retailers and logistics companies alike?

In this article, we’ll tell you everything you need to know!

 

What is a built-to-suit warehouse?

A built-to-suit warehouse, as the name suggests, is a type of warehouse that is designed to suit a specific client and meet certain requirements. These are developed and let out by warehouse and factory development companies to lessees and customised accordingly.

 

The developer will share all of the design and construction elements in the beginning for the client to review and agree upon. Once everyone is satisfied, the construction begins. Following that, the client will rent the warehouse space for an agreed term with the potential for renewal in the future.

 

The customised design is brought to life, providing dynamism and flexibility to the client, meeting all of their requirements and allowing them to handle their logistical needs with greater ease.

 

This new method of warehouses is excellent because it allows companies to rent storage space that is quite literally perfect for them – rather than having to make sacrifices when searching for a reasonable warehouse in a reasonable location.

 

Why are built-to-suit warehouses growing in demand?

While there are many traditional ‘brick and mortar’ retailers left, the majority are going entirely online and switching to e-commerce instead. Certainly, there are those who will always prefer walking around a physical store, however, in a post-covid world, more and more people are turning online for their shopping needs – including their groceries and medication.

 

This is largely why built-to-suit warehouses are growing in demand and will continue to do so; in the US alone during 2021, e-commerce sales grew by a whopping 50% ($870 BN)! With more orders being placed online, there had to be more effective warehousing and supply chain management.

 

The fact is, built-to-suit warehouses are becoming more popular because they can be designed and developed to meet the specific needs of the tenant – while promoting strong future growth. Businesses want to keep up with their customers growing demand for speedy deliveries and a well-optimised warehouse is an essential part of that process.

 

What are the important considerations for a BTS (built-to-suit) warehouse?

When developing a BTS warehouse, there are a number of important considerations for the client, for example:

  • Location: when it comes to logistics and the supply chain, location is important. BTS warehouses not only need to meet the client’s storage needs, but they should be in an attractive location as well. For example: having a warehouse close to the main transportation infrastructure is an essentiality to ensure that goods can flow in and out of the warehouse as efficiently as possible.
  • Size: depending on the client’s operational needs, a BTS warehouse should be large enough to accommodate current requirements, while encouraging future growth as well.
  • Cooperation type: before the development begins, the client and the developer must agree upon whether the BTS warehouse will be let out or purchased entirely.
  • Facility purpose: warehouse-sorting, light production, heavy production, etc. What will the intended purpose of the BTS facility be?

 

Why are BTS warehouses good for business?

What is it about built-to-suit warehouses that is so attractive to e-commerce businesses? What advantages can they bring?

  • New and innovative technologies: leading BTS developers that are on the forefront of the industry and leading the way with new and innovative technologies. These technologies can be made readily available for prospective lessees for the benefit of their business. For example: automation and robotics in warehousing can significantly improve the overall efficiency of a warehouse, whilst cutting down on labour costs. Tie all of this in with a well-optimised supply chain management system and e-commerce businesses can take their organisations to even greater heights.
  • Built specifically for the client: while you might think a ‘one-size-fits-all’ approach is good for warehousing; every e-commerce business is different. As such, simply renting any old warehouse is no longer good enough. Instead, having a warehouse that has been designed and developed especially for your business and unique requirements is an essentiality – and an even greater advantage.
  • No debt or investment: most BTS developers will take on the equity and debt for a new development project – this means that the lessee / tenant can simply sign up for their rental agreement, pay their monthly’s, and save their capital for investing in and growing their operation.
  • Tax deductibles: in many cases the rent for a tenant can be fully tax-deductible. Of course, this will vary from country to country, but it’s worth speaking with your legal representatives in order to learn more about these potentially huge savings.
  • Great for 3PLs (third-party logistics companies): it’s not just e-commerce retailers who are looking to BTS warehousing, but third-party logistics companies as well. 3PLs are always on the lookout for amazing BTS space that can fuel their growth. This is great news for companies that are looking to work with a logistics company as not only can they outsource their supply chain management requirements, but they can also do the same with their warehousing needs as well.

 

The takeaway

Built-to-suit warehouses are the perfect solution for businesses that want to have practical warehouse space that has been designed especially for them. It’s certainly cheaper than finding an existing warehouse and then having to pay to make all of the necessary changes in order to accommodate your needs.

As the world of e-commerce continues to grow and customers become more and more demanding with the speed and efficiency of their deliveries, businesses need to adapt and overcome the most common supply chain challenges; having a well-optimised warehouse in an advantageous location is a great place to start!

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