Inside Small-Bay Industrial: Why Service Businesses Need the Right Space

In the first article in our Inside Small-Bay Industrial series, we looked at collision repair and how the needs of those operators shape the real estate they occupy. For collision repair operators, details such as vehicle flow, parking, specialized equipment and building layout can directly affect how well a location works for the business.

Service-based businesses such as HVAC contractors, plumbers, electricians and roofing companies use small-bay industrial space very differently. Most of their work happens somewhere else. Their technicians spend the day at homes, offices, construction sites and other customer locations. Yet the space they return to every morning and evening still plays an important role in keeping the business running.

The Building Is the Operational Home Base

Consider an HVAC contractor. Most customers will never visit the company's facility, but the property plays an important role in what happens before and after each service call. Technicians may start the day there, loading equipment, replacement parts and supplies before heading out to customers. Service vehicles need somewhere to park, inventory needs to be stored and organized, and office staff may be working from the same location, managing scheduling, customer service and billing.

All of that shapes what the business needs from its real estate. An HVAC company may not need a large warehouse or a prominent retail storefront, but it does need the right balance of warehouse and office space, along with enough room for vehicles, equipment and inventory. Just as we saw with collision repair, the square footage only tells part of the story. What matters is whether the space works for the way the business operates.

Location Means Access to Customers

Location is always important in real estate, but for service-based businesses, it can have a direct impact on the workday. An HVAC contractor, for example, may have technicians traveling to several homes or businesses throughout the day, making convenient access to major roads and the surrounding service area particularly important. A property may have the right amount of warehouse space, office space and parking, but if technicians regularly lose time getting to and from job sites, it may not be the right fit. When a business has a fleet of vehicles on the road every day, even small differences in drive times can add up.

The service area matters, too. As an HVAC company grows, it may add technicians and begin serving customers across a wider geographic area. The property needs to remain practical as more vehicles leave in the morning, return throughout the day for equipment or parts and come back at the end of the day.

So, when looking at a location for a service-based business, the question isn't necessarily, "How visible is the property?" It's, "How easily can the business get from here to its customers?"

The Details Matter, Too

Once you look at the building itself, the needs of service-based businesses can vary quite a bit. An HVAC contractor, for example, needs space to load equipment, store parts and supplies, and support the employees working from the property. That can make features such as drive-in doors, clear height and the right balance of warehouse and office space particularly important.

Parking also becomes a bigger consideration when you look at how the business operates. Employees may arrive in their personal vehicles while a fleet of vans or trucks comes and goes throughout the day. There may also be trailers, equipment or materials that need to be stored outside. A property that appears to have plenty of parking can start to feel much tighter once you account for everything the business needs to keep on-site.

Those requirements can change as the business grows which makes flexibility another important consideration. In a multi-tenant property, for example, an HVAC company may be able to expand into an adjacent bay if it needs more space. Additional parking or outdoor storage may also become more valuable as the fleet gets larger.

None of these features is particularly unusual on its own. But just as with collision repair, they all need to work together. A building can have the right square footage and still be a poor fit if there isn't enough room for the vehicles, people, equipment and inventory the business needs every day.

It's About Understanding the Business Behind the Lease

At Lucern Capital Partners, we invest in small-bay, light industrial and retail properties along the East Coast. One of the things we find most interesting about these properties is the variety of businesses that occupy them and the different ways they use their space.

Service-based businesses are a good example. What may look like a fairly straightforward industrial space from the outside can serve several purposes for the business operating inside. Looking at how the company uses the space, and what it needs to operate effectively, helps us think more carefully about the long-term fit between the tenant and the property.

Understanding how all of those pieces fit together helps us look beyond the lease itself and think more carefully about whether a property works for the business occupying it.

Next, we'll look at retail businesses and what matters most when these businesses choose and use small-bay industrial space.