Real estate isn't the core part of your business. After all, you're a manufacturer, you make stuff. And you spend most of your time figuring out how to do that efficiently and profitably.

But if you are undergoing an expansion or relocation project, why not choose a site that will contribute to your bottom line?

"I advise companies to analyze the 20-year operating costs of doing business in a specific location," said Craig A. Nielson, vice president of the Hart Corp., an international industrial real estate company based in suburban Philadelphia.

Hart firmly believes the real estate aspect of the site selection process is extremely important. He advises companies to choose real estate that is supportive of corporate goals and most productive in the long term.

Old habits are hard to break

Rather than look at real estate, and its associated issues, as part of an overall corporate initiative, many companies fall back on old habits and isolate it. They only look for the right building.

Considering the current buyer's market for existing facilities and the horror stories of unexpected, spiraling costs due to delays and unforeseen circumstances of new construction, evaluating structures and shell buildings is logical.

Buy or lease?

The decision on whether to buy or lease a building is currently influenced by industry competition, the economy, and accounting considerations. Pressured to make the bottom line appear more attractive, companies more frequently consider leasing, thereby eliminating mortgages.

Manufacturers, accustomed to owning real estate, find that the difference between leasing and owning is marginal. Leases customarily are for 10, 15, or 20 years. The company usually behaves like a property owner, in light of the capital investment made readying the building for specific processes. The length of occupancy is also a factor.

But companies wanting to expand or create distribution sites find leasing ideal.

"They have few costly improvements and their needs are basic," said Nielson. "The building needs to be a certain height and capacity, plus a forklift has to be able to operate, making shell buildings ideal.

"A lease offers great flexibility. Since other factors can change customer location and need, companies aren't tied to a property they own if they find relocation is needed. It is easier to get out of a lease if the market dictates."

While leasing might make the accountants or stockholders happy, it isn't the solution for every manufacturer. Companies that have highly sophisticated processes, such as injection molding, almost always buy manufacturing plants. The investment in improvements is so great that leasing is not beneficial.

Don't ignore the environment

Environmental issues must be considered when evaluating heavy manufacturing sites. Many states have enacted legislation lessening the financial and potential liability costs associated with the purchase of such properties. Brownfield developers stepped in, cleaned up the sites, and made them viable industrial properties that are attractive to many companies due to price, location, and other operational issues.

A manufacturer wanted to buy a property that previously housed an auto plant. The site was deemed clean, but the potential buyer found a minor environmental issue on the property. Before purchasing, the new owner required a signed agreement from the state absolving the company of any liability in the future with regard to the environmental issues caused prior to taking ownership.

Avoid the unemployment trap

In the past few years, Nielson has seen companies migrate from rural locations to sites in metropolitan areas with high unemployment.

"Companies should be very careful of such areas," said Nielson. "In their haste to get the operation up and running, companies ignore the reasons they originally chose rural locations, like less expensive operating costs and a ready supply of non-union labor."

Don't go it alone

One of the biggest real estate costs is not knowing what you don't know. While the Internet is a great tool to showcase properties, a broker is necessary to purchase a property.

Companies may not understand how to negotiate the best deal, not only for the property but for the many economic development incentives offered by state and local entities. Some commercial real estate brokers offer nationwide market research that helped companies identify in the best overall real estate solution for the specific expansion or relocation.

Even with consultation, though, impulse buying is not unusual.

"I've had clients walk into a building and reject the property because of the color of the carpet," said Nielson. "Others have selected sites based on the distance from the plant manager's home or how easy it would be for the company owner to fly in and get to the plant."

One publicly traded company intended to build and expand. After careful study and a methodical evaluation process, the choices were narrowed to two in different states.

Top managers from the company hit the road to personally evaluate the properties. The first site fit the needs of the company almost perfectly. Many incentives were offered and the estimated 20-year operating expenses were in line with projections.

As the selection team got out of the car at the second property, a doe timidly emerged from the brush and trotted across an open area. The site being considered backed up to a lake, and when the executives saw the boat dock from what would be their offices on the second floor, all that was left to do was sign the papers. These individuals were enchanted by the setting and wanted a country feel for their new facility.

But the doe, the lake, and the dock were situated in an industrial park that came with a heavily unionized work force, making the 20-year operating costs millions of dollars more than the first property.

Treat your real estate like any other part of your business. It must pass financial muster.