Food related uses have regulation that makes them unique from generic manufacturing and distribution. The Safe Quality Food (SQF) association is the primary regulatory food agency that ensures that food production companies adhere to strict industry standards.
Many of these industry standards have real estate implications. I’ve advised executives of food companies that produce baked goods, bread, frozen yogurt, ice cream, smoothies, frozen fruits, frozen vegetables, soups, sauces, broths, teas, craft breweries and beer distributors and although each has its own unique operation, there are enough similarities to draw insight.
Increased Access Control
The interior of the building will most often include a lobby area that restricts visitors’ ability to enter the rest of the facility without signing in and wearing the property attire. Proper attire will vary with different food production focuses, but most require a hair net at a minimum. Some will require a smock, beard net, safety glasses, hard hat, and booties for your shoes. Even still, you might have to wear thick insulated jackets for going into cooler and freezer rooms.
Increased Worker Density and Intensity
Food production buildings usually require a higher restroom stall count based on a more considerable amount of people working within the warehouse on the production line. An increased number of workers per shift and quantity of shifts result in needing additional warehouse restrooms, break rooms, locker rooms and parking.
Energy Supply and Distribution
Food uses usually require machines that blend, mix, convey, and package. Food production and beverages require cooler, freezer, and blast freezer in many applications. All of these require energy. In most cases this energy is electricity that needs to be distributed throughout the warehouse with subpanels, transformers, switches and backup generators. Additionally, for cold storage there is the refrigerate needed for the units on the roof that most often times are ammonia based. As a result, utilities and energy availability is more important. Some counties have regulated utilities, others are unregulated and yet others have cities that have their own utility systems. Each of these need to be factored into any real estate project.
In Southern California, the majority of urban and suburban rail lines are no longer in service. Some have outdated switches that are cost-prohibitive to activate or have too sharp curves in the rail line that are no longer suitable for use. Most rail uses in Southern California are now oriented for long haul use from the ports to other intermodal centers. That said there are still active lines, in other parts of the state and country there are more active and prevalent rail systems and large producers find rail to be the most cost effective transportation route for inbound raw materials.
Another aspect of bulk raw material for food production is sugar, oil, and flour. Ingredients go into large silos outside of the building. In addition to raw materials, there can be ammonia and nitrogen tanks to supply gas for climate-controlled areas, coolers, freezers, and blast freezers. Silos and tanks require concrete footings and pouring pads. These silos and tanks usually do not require screening or enclosures. They do require cutting into the tilt wall panel for pipes to connect from the silos and tanks into the building. All of these installations are also subject to removal upon surrender possession of the premises back to the landlord upon lease expiration.
A mezzanine is a steel platform installed within a warehouse building to create a second story that can handle heavy weight-bearing. Mezzanines can be helpful for manufacturing, high-velocity distribution, aerospace, and engineering. Commercial general contractors install these mezzanines and will require concrete footings.
Once raw materials are brought onto the property and into the building, there can be mixing and processing next. Mixing is a process for dry food production, in which producers combine ingredients in specialized rooms built within the warehouse. Blending can also have a gravity component that can require a higher clearance building and installation of a mezzanine platform.
One of my partners and I represented a private family who had sold their food production company to a large conglomerate. The private family kept the real estate for a long time until it was time for them to dispose of it to get their estate in order and provide cash distributions for their heirs. There was considerable litigation at this point just before the sale of the property. The tenant thought that the mezzanine was part of the building because it had footings connecting the steel beams to the foundation. In contrast, the landlord and seller believed that the mezzanine was a trade fixture to be removed at the end of the lease obligation. As you might imagine, the cost to remove the mezzanine was a few hundred thousand dollars, so it was something they both had a vested interest in settling. The lesson learned here is that when building a mezzanine within a leased property, it is vital to consider these types of improvements during the initial lease negotiation phase.
Water Supply, Clarifiers, Water Discharge
It is common for buildings to need a more abundant supply of water, depending on the specific type of food production activity. Water supply, just like with fire sprinklers system upgrades, depends on the size of the waterline coming from the city water supply and the water pressure.
With any type of water and liquid being processes comes waste and wastewater. Water and liquid waste can require a multi-stage clarifier. Think of a clarifier like panning for gold in that different-sized screens are responsible for screening out waste particulates. Clarifiers can also require approval and credits from the city in that they will only allow a certain amount of waste to go through the system at any given point in time. Having a checklist and proactive team of people that do this for a living can protect you.
A brine line is a method of sending any excess salt expelled by industrial producers to the sea instead of into the groundwater aquifer. Food producers must be aware of their wastewater needs so that when they grow, they are growing in areas that can accommodate their growing need for discharging wastewater. Many large companies have spent considerable resources exploring industrial property developments to find out in the late stages that the locale cannot accommodate their discharge requirements.
Cooler and freezer applications are commonly described as a box within a box. The inside box is the climate-controlled space; it has its own four walls and ceiling and built within the larger box, which is the warehouse. Think of it like the old Russian doll set you used to have as a kid.
In a perfect world, a food operation that requires a significant cold storage component would build a new building instead of retrofitting an existing manufacturing or distribution building. Building new is preferred because the concrete slab needs to be able to handle moisture, temperature, and load variations. It is possible to do this within an existing building, but it can be expensive. This goes double for food and beverage that are largely cold storage and distribution oriented. Cold storage by its very nature is predicated more on the storage of perishable goods at specific temperatures. This results in buildings that are literally 100% climate controlled. Food producers, beverage distributors and cold storage third party logistics (3PL’s) all have their own distinct operations meaning that a building that works for one won’t work for the other.
There are a variety of different cooler and freezer systems and applications that have changed over time, so it is useful to be very conservative if you are trying to work with any existing system. Fortunately we have several specialized architecture, construction and industrial engineer consultants that we bring to site visits with us to help better uncover underlying building systems when we are out looking for facilities.
The dock areas for many operations will be temperature controlled. Docks also need to be closed to the outside elements with screens and motorized roll-up doors to keep the right temperature inside and keep dust, dirt, fly’s, and posts out. Sometimes we can negotiate these into the tenant improvement allowance from the landlord.
Most food producers benefit by selecting an industrial building with a cross-dock orientation so that raw materials can come into the building and finished product out the other end. Traditional industrial buildings are oriented so that all ingoing and outgoing materials go through the same loading area.
Food production companies love to look for buildings that already have food improvements. It is possible to find industrial buildings that were once used by a food producer that can accommodate the next food production company. It is rarer though than executives would like to believe. The primary reason is that every company has proprietary methods, and every type of company has a unique manufacturing process. Making pretzel chips is a very different process than making hot sauce, or frozen yogurt, or ketchup. Because of this, the location, type of cooler, freezer, floor drains, clarifiers, wipe down walls, are not in the right size, shape, or orientation to provide any value to the new food company. Old food production buildings present an obstacle to most new food companies because it can cost six figures to remove all of these improvements before building out new ones.