These facilities do not require as much glass storefront, tenant improvements, demising walls, landscaping or parking. Developers are able to achieve greater lot coverage and construct more rentable square footage with a high-bay warehouse. Second, the institutional appetite for big-box distribution space is much stronger. In developing an exit strategy, many developers stick with institutional-grade distribution facilities that are selling at capitalization rates between 100 and 200 basis points below that of smaller buildings. Finally, large distribution buildings are less management intensive.
Credit is often stronger with the large tenants and the re-tenanting costs are substantially less.
The majority of the speculative development currently underway in the Kent Valley consists of large-bay, warehouse distribution buildings. These buildings, due to bay sizes of 12,000 to 15,000 square feet, typically are not divisible to less than approximately 25,000 square feet. Even then, the space is long and narrow, with limited truck loading. The firm currently occupies 6,300 square feet in Kent. It required 12,000 square feet and began a facility search in March 1996.