How Much Office Space Belongs in an Industrial Building?

You will hear rules of thumb about how much of an industrial building should be office. Treat them cautiously. We do not offer a percentage here because the right answer depends on who works in the building and what they do. A distributor with a handful of floor supervisors and a remote back office needs far less than a manufacturer that keeps engineering, quality, sales and accounting under one roof.

Ratios also describe buildings, not businesses. A flex building with heavy office finish may suit a company that wants a professional front door and light production behind it. The same building would be a poor fit for an operator that needs almost all of its floor for pallets. Start from your own program and let the market come to it.

Have operations and finance list what must physically happen outside the warehouse floor. Be specific, and separate today's needs from a realistic growth case.

• Staff who need a desk on site every day, plus those who come in occasionally.
• Dispatch, shipping and receiving desks, which often belong near the docks.
• Conference, training and customer meeting rooms.
• Break room, lockers and restrooms sized to the whole shift, including warehouse staff.
• Server closet, records and sample storage.
• Showroom or customer pickup counter, if any. Check that zoning allows it.
• Quality control, lab or light assembly rooms that need conditioned space.

Then think about shifts and sightlines. Some functions work better on the floor or on a mezzanine, and a supervisor's office with a window onto the floor may do more for operations than a suite up front. An architect's test fit against a real floor plan will show whether your list works in a specific building, including columns, entrances and clear paths to the dock.

Excess office has two costs that do not show up on a flyer. First, office area generally takes space that could otherwise hold product or production, and it can break up the floor in ways that make racking harder. Second, it is rarely free to change. If you remove walls, ceilings and mechanical systems to recover floor area, you are paying for demolition, and you need landlord consent to do it.

Then there are running costs. Extra conditioned space means extra heating and cooling, and depending on your lease, you may be responsible for maintaining and replacing that equipment. Compare two buildings on what you will actually use, not only on total square footage and base rent. If a building's office area is more than you need, ask these questions.

• ✓Can the landlord remove or reconfigure the excess office before delivery, at the landlord's cost?
• ✓Will the landlord accept a lower rate reflecting that part of the finish has no value to us?
• ✓If we demolish office during the term, must we rebuild it at the end?
• ✓Can we sublease the extra office to someone else, and does the lease allow it?
• ✓What is the age and condition of the HVAC serving the office, and who replaces it?

Too little office is usually easier to fix, but it is not free either. New office in a warehouse generally means framing, ceilings, lighting, restrooms and conditioned air, and sometimes more electrical capacity or plumbing. Get a contractor's pricing on your actual plan rather than relying on a general cost-per-square-foot figure, since conditions vary by building.

Alterations can also bring accessibility requirements. ADA.gov says commercial facilities such as office buildings, factories and warehouses that do not provide goods or services directly to the public are subject to the ADA's requirements for new construction and alterations. Under the Department of Justice's rule on path of travel, an alteration affecting an area with a primary function must, to the maximum extent feasible, make the path to the altered area and the restrooms, telephones and drinking fountains serving it accessible, subject to limits in the rule. Ask your architect how this applies to your project, and have your attorney address who pays in the lease. If your facility will serve customers on site, additional ADA obligations may apply.

Local building and zoning rules can also apply to an office addition, including permits and possibly parking requirements. A mezzanine raises separate structural, code and sprinkler questions, so bring in the architect, engineer and fire official before you count on one.

Before you assume a mezzanine solves your office shortage, ask the engineer about the floor, columns and sprinklers, and ask the landlord who removes it at the end of the term.

If you need office work done, negotiate it as a whole package. Use the steps below to keep it tied together.

1. Prepare a test fit and contractor pricing during the proposal stage, before the letter of intent is final.
2. Ask whether the landlord will build the office as part of delivery, or give an allowance toward your own work.
3. Compare landlord-funded work against the rent and term it comes with, since the landlord generally expects to recover it.
4. Attach the agreed plan to the lease or work letter, with responsibility for any code-triggered work stated.
5. Settle at signing whether the office may stay at the end of the term or must be removed.

That last step is often overlooked. Bean, Kinney & Korman notes that landlords often require specialized alterations to be removed and the space restored to its original condition, while tenants would prefer to avoid those move-out costs. Dykema suggests addressing removal and restoration when the lease is negotiated, including an exhibit listing items. Get the removal answer in writing when the office goes in, not when you are moving out.

If you buy the building or have a long lease with renewal options, think about who could use your space after you. A modest, flexible office that a future occupant could use costs less to adapt than an elaborate customized one. For a tenant, the same thinking affects your exit: office that helps a subtenant may make the space easier to sublease if your needs shrink, while highly specific rooms may not.

TAG works only for occupiers, and we build office needs into the search from the start, so the buildings being compared reflect the way you work and the negotiation covers both the cost of office going in and the cost of it coming out.