Scylla or Charybdis - Food Manufacturers Navigate Narrow Waters

Food manufacturers looking to expand face challenges. Class A buildings are scarce, mediocre buildings are overpriced, and inflation has eliminated return on investment for new construction.

Most of our clients view the two best choices as acquiring an existing food facility, with as much compatible infrastructure as possible. Or, acquiring a generic industrial facility, suitable for conversion to a regulated use. Neither is without issue. Occupiers increasingly scrutinize second generation food facilities for pre-existing contamination. Even absent a recall, pathogens from mold to e-coli and listeria can be dormant in any food plant, and exposure to this risk is something many boards refuse to accept. This leads to an increasing practice of looking at industrial plants with elevated utilities, expansion capabilities, and a configuration suitable for automation. A recent client seeking 800,000 SF of additional capacity evaluated every option, from new construction, or acquiring a food or non-food plant suitable for conversion. After a dozen site visits, the only property suitable for board consideration was a computer assembly plant, with redundant power, expansion land, high finishes, but with no exposure to food borne pathogens.

Existing food facilities remain a second option. But clients scrutinize public records and previous sanitation practices, increasingly concerned with the investment necessary to comply with evolving regulations. As food safety standards intensify, occupiers often say they are chasing a form-changing phantom. That unquantifiable investment, added to ordinary upfitting and modernization, makes for a difficult decision.

Every project is nuanced, but speed to market is a commonality. In today’s market, the best facilities often sell directly following the closure announcement. If the properties do make it to market, they trade quickly. Occupiers are best served by real estate advisors dedicated to the food, ingredient, and nutrition sectors, who are aware of off-market opportunities, or plant closings before they are announced. Who you choose matters. For additional details on Cresa’s unique capabilities, please contact Jeffrey J. Counsell, Principal & Practice Lead | Food, Ingredients, & Nutrition.