Mastering Material Handling Dynamics in Industrial Real Estate

Podcast

Justin Smith brings in Greg Hanoian from United Material Handling to delve into the intricacies of material handling, timelines, and considerations for setting up warehouses. Joined by Chris Vassilian, they explore the basics of material handling and its growing importance in client conversations. The discussion covers essential considerations when setting up a new facility, from roof height and slab thickness to forklift configurations. Greg shares insights into the timeline for quoting and installing racking, the permitting process, and the challenges of relocating existing racking. 

Key Points:

  • Importance of integrating material handling into client conversations for a holistic understanding of their operations and finances.
  • Factors influencing the timeline for quoting and installing racking, including roof height, slab thickness, and forklift considerations.
  • Challenges and considerations when relocating existing racking, such as code changes, seismic issues, and the potential need for slab tests.
  • Insight into the permitting process, lead times for steel, and the impact of high pile storage requirements.
  • The significance of early involvement in the pre-con development stage and collaboration between material handling experts, brokers, and clients.
  • The complexity of restoring a warehouse after removing racking and the potential downtime involved.
  • Real-world scenarios highlighting the importance of communication and proactive problem-solving in the material handling process.
  • Considerations when dealing with older buildings, including the lack of CAD files, seismic issues, and the need for core tests.
  • Acknowledgment of the collaborative efforts between material handling professionals and industrial real estate experts in achieving successful outcomes for clients.

 

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Episode Resources

Connect with Greg Hanoian

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Transcript

[00:00:00] Justin Smith: We got Greg Hanoian, United Material Handling, joining us today on the podcast. And we have Chris Vassilian on our squad, and we’re going to talk all things material handling. And Greg, I thought it would be great having Chris who’s 2 years in the biz, who has a good slew of deals under his belt. He’s reaching the point where material handling is now part of the conversation with clients, which is a great sign of progress and of growth where you’re not just talking about an address, a dollar per square foot and what the net expenses are right? You’re integrating with the client’s operations and finance. So, I was hoping we could go over some of the basics for material handling, and then maybe into some of the fun stuff of warehouse automation at the end. But Chris had written down a bunch of questions as he’s on his journey. So I was hoping we could go through some of those and that’d be helpful because there’s a lot of GMs and facility guys who haven’t set up their first building, who came into one and who haven’t done a move yet or two or three or four, and so that’s a great opportunity to educate and entertain a little bit.

[00:01:13] Greg Hanoian: Sounds great. Yes, love to help.

[00:01:15] Justin Smith: Chris, what’s on your mind? 

[00:01:17] Chris Vassilian: Yeah, a timeline. So, what should a tenant who’s looking into leasing a new facility and wants to get a quote for installing the racking, what kind of timeline can they expect? Where do you like to start in that process? And how much time should they budget for to get it all set up and running?

[00:01:36] Justin Smith: And to make it timely to an example might be in Ontario of like 60,000 feet or so.

[00:01:43] Greg Hanoian: Right, of course. No. Perfect. Let’s make this specific. Yeah, no, Chris. That’s a great question. And I’m glad you’re asking it. Currently right now, depending on a lot of different factors, and I want to talk about those a little bit really depends on how quickly we need to discuss it. The first thing to kind of ask initially is, hey, how much racking do they have currently? Are they looking to relocate it? And, if there’s an opportunity to relocate that, we’re more than welcome to help, in general, most racking companies are helpful to do that. But you really have to take into consideration, what’s the clear height of their building now and what are they going to go to? As you know, as you kind of move more tenants say out of Orange County, for instance, to the Inland Empire, you know, you’re going to go from a 24’ or 26’ foot building to potentially 32’, 36’ or 40’. So, if they really want to maximize that rent, maximize their density and their height, most likely they’re going to have to at least consider new upright so that we can take them higher.

[00:02:41] Greg Hanoian: So, you really want to start first on kind of focusing on roof height of what they have now and what they’re going to be going to. Secondly, we’re going to have to take into consideration the slab thickness. Again, going from maybe an older building to a newer building, you’re probably going to be looking at, especially 60,000 and above, you’re going to start looking at a 7-inch slab, most likely on a new building, maybe a 6-inch slab, and we can go from there.

[00:03:04] Justin Smith: And this is because the higher you go, the more weight, cumulative weight that’s producing a load on the foundation. 

[00:03:12] Greg Hanoian: Yeah, I was just at that bus tour, matter of fact, yesterday, and Prologis is kind of a cool unicorn out there, if you will, in Fontana, where they went 42’ clear with a 9-inch slab on a spec and the buildings are only 300,000 square feet. Pretty impressive. I really thought that they could really sell that a little bit more but, it is interesting, and I would you know, highly recommend clients looking at something similar and never hurts to have a thicker slab building or a little bit more height.

[00:03:37] Greg Hanoian: And then lastly, we need to take into consideration Chris, hey, are you looking to change your forklifts? Are you wanting to go more narrow? Are we going to be interested in maybe look at it like a VNA application? Which would be a very narrow aisle. And when you’re talking about those clients who are relocating or moving around right now every single foot cost something more, right? Even if they’re in Orange County or even if they’re in the Inland Empire, they’re going to have to face the fact that their rent’s going to go up. So, we’re seeing a lot more clients who say maybe have a hundred thousand square feet. Well, let’s look at maybe 60 now. Let’s get a newer building that’s taller and let’s see if we can do something about going into a V&A configuration where we could basically pack the building that used to take a hundred thousand square feet of pallets and now put it in a 60 or 80. And see what we can do.

[00:04:26] Greg Hanoian: With those considerations however, they also have to consider the lead times of those kind of forklifts these days. And in talking to some of the people I know there is still like a year’s waiting list or a backlog on some of those specialty forklifts. So those are the kind of things that we really have to start considering in terms of that.

[00:04:46] Greg Hanoian: On the steel side of things, right now you’re looking at anywhere from six to eight to 12 weeks of lead time. It could be even shorter in a case with us at UMH because of the fact that we store so much racking in our warehouse. So, we do have an opportunity on the smaller deals, like 60,000 square feet, depending on the height of the building, that will have racking in stock and may be available to get on site within three to four weeks.

[00:05:12] Greg Hanoian: Now, the other thing that you’re also going to have to take into consideration is permitting. That’s the real crux of the whole situation is permitting. Most of the time when we tell people that permitting lead time can be anywhere from three months to six to nine months. And like in cases of San Diego, it can take even over a year. It’s brutal. So, most clients go yeah, we’re gonna do a permit, but we don’t have a problem getting it stocked. And if they slap our hands, so be it. We can’t wait on a brand-new building sitting 12 months waiting to fill the rack, right? So there are some contingencies we put in place. We’re dealing with the client now. It’s going to be in about 30 days. We’re using some of their racks. Some new rack and they understand that the permit is going to take longer than 30 days. They just need to get out and get into their space. So, all of those things kind of take into consideration that process as far as that’s concerned.

[00:06:04] Greg Hanoian: Lastly, from a design standpoint, once we have an initial call, you know that process takes about a week to two weeks to put pen to paper or put our CET program into place, get a design to our client, start having some dialogue back and forth. And then finally getting the actual numbers to a client probably takes another week or two. So, we’re trying to streamline that down so we can get numbers to clients within at least a two-to-three-week span, but we’ve got to take into consideration all the engineering, all the design, all the shipping, everything that kind of falls in line with kind of creating a racking system. So hopefully that kind of helps answer your question.

[00:06:42] Chris Vassilian: Yeah, that was thoughtful. Thank you. Just going off of permitting, is that just the general permitting? And then I know there’s also a high pile stock. And so, are those one in the same, or is that high pile stock submittal something additional that maybe adds onto that timeline?

[00:06:59] Greg Hanoian: It is definitely something that’s additional. And we actually have third party people that we get involved with that. We actually try to bring them in as soon as possible. And we make the initial introduction. We can include it in our package, but we really want that relationship to grow between the HPS person and the client because the client knows their commodity the best. We will bring in those two packages and get those submitted. But yes, they are yeah. A lot of times different ones will go to the building department. One will go to the fire department. And so yeah, there are typically two different types of permits. A lot of times that need to go into place for both.

[00:07:34] Justin Smith: People can get tripped up on high pile storage for sure. Or have like a mismatch in sprinklers and it can create all sorts of problems. 

[00:07:42] Greg Hanoian: Yeah, we actually have a checklist guide. So, I’ll be more than happy to send that over to you just so you guys are aware. And actually, that checklist would be good because it’s some at least some initial questions that you guys can start asking the client. And you know, as part of what I’d like to do on the pre con development stage with a lot of clients is give that form to you guys. Let’s create some elevations. Let me get some basic information on the client’s palette, weight, size, configuration, what’s the commodity. And then as you guys as brokers continue to like look at different buildings, we have elevations that we can work with. Meaning that, hey, Greg, we’re looking at two or three buildings. What does that racking total look like? We’ve got a 32′, a 36′ and even a 40′. How many pallet positions can we get in with each type of elevation we’ve already told you about. And so that really helps you guys on your side be as thorough as possible to say, hey, maybe we can save this client some rent and go vertical and get more into this building.

[00:08:40] Chris Vassilian: Yeah, I like that.

[00:08:41] Justin Smith: Yeah, it’s amazing how often it’s missed. Yeah, when I just think of some of the conversations we’re having recently of another requirement our initial meeting, it was 200 to 250,000 in like a 24 foot clear building, 26. And then it’s no, we’ve changed our minds, it’s 250 to 300,000 feet without any discussion of ceiling height whatsoever. The bigger you go, sometimes the taller of the building. It depends on what city or in like a submarket that you’re in. What a missed opportunity to know that you are planning, and you know what you’ll get, and you’ll know what it’ll cost, and you’ll know what you can deliver to your customer. And you know what your PNL might look like. So, I’m so surprised that it’s our job too, not our job but it goes on said so often, and it seems like so many better decisions are more informed decisions could be made if that’s earlier and more up front. 

[00:09:42] Greg Hanoian: Yeah, absolutely. I couldn’t agree more. These buildings are built to maximize the square footage as much as possible. Everybody should be getting some kind of a material handling racking company involved as soon as possible. It should be part of the discussion Right in the same time that you are now I mean I’m asking people to get us involved before leases are signed. People need to maximize that space. As you know, you need to take advantage of the few months of free rent if the landlords are giving it to them or if there’s not we need to be jumping in and getting that order literally the same day that a lease is signed because you’re looking at potentially that backlog of information where it comes to the permit where it comes to the actual steel. And that can really back up when you think about a two-to-three-week design, you’re talking about a, you know, three to six-to-nine-month permit process. You’re talking about you know, 8 to 12 weeks of lead time to get the steel in if it’s not already here in the States. So, you can see how everything starts to tack up. It’s very common that on these bigger projects, 100,000 or 200,000 square feet and above, it might be 3 or 4 months before Racking shows up on site to actually get in. So the sooner it’s discussed, the better absolutely.

[00:10:49] Chris Vassilian: If you are coming from a lower clear height building, I think your example of 24 to 36 is something that’s pretty topical and top of mind to a lot of tenants right now. Especially in IE, where rates are starting to equalize since new development projects are trying to attract new tenants and get leased. And so, with the old racking, what do tenants do with that? Do they sell it on secondary like listening services or is that something that you can help with the disposition of? I’m just curious if they’ve racked this building and they’re going to start fresh on the new one. What kind of that disposition process looks like?

[00:11:23] Greg Hanoian: Yeah, so there’s two things to really consider here. The first discussion is like, hey, can we reuse any of this? So, let’s talk about that first. We always say there’s an opportunity to reuse things. However, depending on the age of that racket, whether it’s 5, 10, 15 years, a lot of code has changed. Especially coming into the Inland Empire and dealing with, you know, Southern California from a seismic standpoint. So, the rating changes, if you’ve got something that’s 5 or 10 years, there might be a chance to use some of the material. But chances are that most likely at least the uprights what gives you the height are going to have to be revisited. The base plates aren’t going to be sufficient. So, when we talk about that, we need to finally, you know, kind of explain to our client, hey, don’t think that you’re just going to be able to literally lift everything you have and move it into the new space. Okay, they have to come to that realization first. In some opportunities there are to do that, and we’ll help with that as best as possible. Most of the time, we’re going to be able to take some, if not, maybe any of it. So, depending on the age of it. A lot of times, at the very least, we can take the beams, which are coming off of the rack, which is actually the stuff that’s holding the product. So, we like to at least take that into consideration because those ratings can typically be able to work with new stuff. And then as far as the rest of it’s concerned, we just have to really take into consideration what that new height of that racking is going to be like you said from a 24′, 26′ clear building all the way to 36′. You’re looking at 10 feet of extra space. They’re going to want to maximize that depending on the pallet size. It’s 2 or 3 additional positions per bay high. So that really adds up to a lot of extra value there. So we really take all that in consideration. As far as the, you know, disposal of it. Yeah, we can talk to them as far as what we can do is put them in touch with someone to give them a value for what that steel is and go from there.

[00:13:07] Justin Smith: There’s a whole lot more nuance than I was expecting. I love it. What do you think, Chris? That gives you a pretty good start. That’s a lot of different things that may not be part of an ordinary conversation with clients or that clients don’t always share or it’s not always top of mind. Maybe not an afterthought, but it’s maybe a next step that’s not thought of as early on as it could be.

[00:13:27] Chris Vassilian: Yeah, I think another one of those that we see is tenants not thinking about their restoration clause in their lease. If you drill holes in the ground to set up your new racking, and you get excited about the new building that you’re moving into, sometimes you don’t think about restoring the current one. And so, when you’re dis-installing or removing the racking and moving it over, what is some of the restoration look like? Is it just filling in those holes and what’s kind of like the timeline of how long it takes to restore a warehouse and pretty much removing the racking and making it clean again?

[00:13:59] Greg Hanoian: Yeah, of course, obviously shaving down all the cores, epoxying doing all that stuff takes some time. That’s part of the disposition process banding up all the materials as well. That’s the really big thing that clients really have to consider is depending on the size of the buildings, these installations take a month to three months potentially. So, when clients think about, you know, hey, I’ll just relocate my stuff. Well, are you okay with one or two months of downtime in your old building and then one or two months of downtime in the new building? What’s that look like? So maybe we should really be considering new racking since we’re looking at potentially three to four months of that in between time.

[00:14:40] Greg Hanoian: So that’s really what they have to consider is the transportation and tear down and the reinstall of the old stuff worth the value and the timing going into the new building. So, depending on some of the client’s needs and how much they floor stack or how much racking they’re really taking over, you know, we can work with them on those kind of factors and kind of help with that facility planning.

[00:15:00] Justin Smith: And where’s the inventory go in the meanwhile?

[00:15:04] Greg Hanoian: That’s absolutely the case in point. As I mentioned, I’m working with a client who’s got, you know, basically 30 days to get into this new space and they are already starting to take the product out of their existing stuff, but they’re only having us move over four or five rows. It’s a little bit different when you’re talking 40, 50, a hundred rows, that becomes a really big, hard pill to swallow as far as moving all that product around. 

[00:15:26] Justin Smith: Above and beyond your normal day job and customer orders and delivery dates and all the time considerations.

[00:15:35] Greg Hanoian: Yeah, I mean, we have to consider guys our clients don’t move that often right, so part of our job is kind of that construction facility management as far as the timeline, as far as getting realistic with clients as far as what it’s going to take. And especially in California, it’s harder because there is so much unfortunate bureaucracy to what happens with what we do, with the permitting and the high pile and all that stuff. So, you know, these things take a lot more time than a lot of people really like to consider. So, it’s always better to be safe than sorry. If they think it’s going to take one month, it’s most likely going to take two or three months.

[00:16:07] Justin Smith: Tell us a horror story. We’re fresh off of Halloween, Greg. We’ll close off with one of your best horror stories.

[00:16:14] Greg Hanoian: Actually, I got a really quick one that’s actually kind of fresh off the top of my head that we’re, we’re doing right now where we’ve actually knocked out the whole job. We’re just about ready to turn it over to our client but again, the permit process is quite the partnership. And right now, we’re in a job we’re finishing in Riverside County, 300,000 square feet, about a third of it’s racked. Done a great job with our client. We have our permits on the building side. However, the client hasn’t gotten their TI permit for the fire department and a few of the things. They’re start holding up our permit because they haven’t taken care of their emergency lighting. So again, it’s these things where the communication we’ve been up front with the client, but it’s like you can get to 99 percent and that 1 percent that’s out of your control still can affect you.

[00:17:00] Greg Hanoian: So, as you know, there’s no such thing as a perfect project. All you’re trying to do is just have perfect communication, right? So that’s part of the handholding. So now I’m going back and forth with the building owner saying, hey, Greg, you know, there’s some miscommunication about the permits. And obviously I get on the horn with my guys and try to figure out what’s the problem here and come to find out the tenants known about it for three, four weeks, but they haven’t addressed it with us. So, they’re looking for us to finish and we’re like, hey guys, we need you to kind of deal with your emergency lighting and your emergency space plan. Like where are you guys at with that? So naturally they’re hustling right now to try to get that all figured out. 

[00:17:37] Greg Hanoian: There’s no perfect project, but you can aim for perfect communication. Chris and I were just talking about the difference between moving into a new building where they have to build office and you can’t get a certificate of occupancy until everything’s done. Versus moving into an existing building where everything’s built and maybe there’ll be some changes or modifications and how that can change things. So this is a great example of how something totally unrelated to your rap job still ends at the same guy at the counter that is trying to figure stuff out and corral the new company. You bring up a good point that the issues we deal with on, you know, existing or older building is just how much information is available, right? When we’re trying to look at a 20-year-old building, or 30-year-old building, chances are there’s probably not a CAD file around. So that makes it a little more difficult for us, especially when we have to take into consideration, especially here in California, all the seismic issues. And so, we’re going to put the onus more on the tenant to be like, hey, we need you to track down some stuff with the landlord. We can make some presumptions, but at the end of the day, before we submit an older building that doesn’t have any information for us, we might have to do a slab test. We have to core it out and just make sure.

[00:18:57] Justin Smith: How big is the slab, Chris? Yeah, we don’t do how thick slabs are right.

[00:19:03] Greg Hanoian: We can have those things. Yeah. You know, what’s the psi? So we have that ability that test is a little bit, it’s available It’s you know, nothing people want to pay for but if somebody’s committed to the building and really wants some good values it’s gonna have to take a core test as far as that’s concerned and just get a better idea what that’s looking like. What the sprinklers are too. Those are the two big topics when it comes to dealing with the older sprinklers is, you know, what are the heads on that? And what’s the slab thickness from there? We can work around the rest of the factors.

[00:19:33] Justin Smith: Greg Hanoian, thank you. I feel like I want to be sensitive to your time. We’ll hit the fun warehouse automation, another time, perhaps. I feel like that’s great, like at the origin of a project. What are you must haves in terms of gaining information and understanding the situation to start to have an intelligent conversation that’s meaningful and that impacts the whole project of what you’re looking for and what success looks like where you’re done in the building racked products in there and you can start to forget all the pain from what it took to get there. 

[00:20:13] Greg Hanoian: Yeah, I have every year that I worked further and further into the industrial building I’ve that much more respect for what it is that you guys do in terms of really just helping to navigate the entire process because there are so many things to consider. I just want to say thanks for all the intel that you provide in content as far as me knowing what I need to talk about early on too with clients. So, it really helps to just be part of that team if at all possible. And that’s what we want to do is just be there to help guide the client because they don’t make these decisions all that often it might be five or ten years right and it might be new people. So, it’s hard to dust off the cobwebs when it comes to what did we do last time with our move? And where are we going and how have codes changed? I mean, that’s part of what our job is as professionals. 

[00:21:00] Justin Smith: Yeah, without a doubt. Thank you for joining us. And we may have a ride along for you as we’re looking at buildings here on one of these ones pretty soon. 

[00:21:10] Greg Hanoian: I love it. Sounds great.