Warehouses and logistics areas and industrial zones are seen every day. Do you know, however, what the process of building these buildings is?
We discussed the six main stages of constructing these buildings with two experts at CBRE: Marek Bíza is a civil engineer who coordinates the technical and legislative processes related constructing the halls. Petr Šimeček is one of the consultants involved in acquiring and selling commercial real estate.
Phase One: Project Planning
“We have a client whose business plan includes a new industrial hall. We build on its needs in terms of location, workforce, transport links or distance to its largest customers,” said Šimeček.
The first step is to find an ideal location, whether it is an empty plot of land, a standing object or a brownfield, then a short list of options is made for the client.
“In this stage, economic and technical balance sheets are also made, how much the acquisition costs, how much the construction costs and the amount of subsequent investments. These calculations are based on future rental profits or profits from the client’s activity,” added Šimeček.
In the first phase, the purchase contract is not signed, that is in phase two. If a more detailed discussion takes place, a so-called letter of interest may be signed as a guarantee.
Land is mostly bought with an agreement on a future sales contract. This reserves the site and permit works proceeds. Only after obtaining the territorial decision and the Environmental Impact Assessment (EIA) and the approval of the regional authority is the land transferred to the buyer. “This takes care of the client’s risk of buying land which fulfilling their future plan is not feasible on,” said Petr Šimeček, an acquisition agent.
Phase Two: Acquisition
We have selected the land or premises that we want to buy. In cooperation with the legal, technical and commercial team, technical and legal due diligence is carried out. “It is a crucial phase for further development, and mistakes can’t be made like buying land without securing access or a legal defect – for example, it will later fall into restitution,” said Šimeček explaining the pitfalls and added that the technical analysis of the land also serves as the basis for negotiating the purchase price.
Phase Three: Planning and Construction the Building
In this step, project documentation is created and the technical surveys necessary to obtain the necessary permits are carried out. An EIA is also obtained (see box).
“When we have an EIA and a land permit we get a building permit. In parallel with the licensing process, we issue a tender for a general contractor for the construction and, after obtaining the building permit, the developer begins to build immediately,” explained Marek Bíza.
Phase Four: Operations
We are in the phase of the day-to-day operations of the hall. It is also necessary to maintain it, just like taking a car a service dealer. All premises must be kept in shape to serve well for many decades. This is what property management and facility management provide.
Phase Five: Remodelling and Adapting
Changes occur in time: tenants leave and new ones arrive with other space and equipment requirements, staff numbers change or its adapted from a production to a storage facility.
All these changes affect the construction of the building, typically the facade, roof, pillars or floor, as well as the equipment (extinguishing and safety systems, water and electricity supplies). These are mini-projects that have their own planning, licensing and implementation phases.
Phase Six: Sell or Redevelop
We are at the end of one cycle and stage. However, be careful, we are not at the end of the hall life. They are designed for at least fifty years of operation.
“It is possible to sell a hall that is still leased and look for an investor. It is often also the case that the owner who is still currently using the hall sells it and leases it back, for example, when they needs cash or do not want to have money tied up in property,” noted Šimeček.
And of course, sometimes the hall is rebuilt or demolished.
The location, the building office, the neighbourhood (municipality), the tenants’ requirements and finance all affect the duration of the individual phases.
Planning is individual, where one client chooses the site half a year and another two. “It’s usually about six months to a year,” said Šimeček.
Acquisition from the initial contact to the signing of an agreement on a future sales contract takes approximately half a year. Authorization is very difficult and the Czech Republic has one of the most demanding legislation policies in in the region.
“Obtaining a land permit and an EIA usually takes ten months to a year. Getting the building permit itself takes another six months. In total, the authorization phase takes about 16 to 18 months,” added Bíza.
Paradoxically, the construction itself, like for a typical 10,000-square-foot large hall takes half a year, represents only a third of the length of the entire project.