As developers we are always trying to anticipate what the potential challenges to a project might be. However, it is how we handle the unanticipated challenges that can make or break the financial viability of a project. It is at those times that we may be forced to change direction mid-stream to protect the financial success of our project.

In 2001, we purchased a 40-acre tract of industrial ground in Dauphin County. By all standards, the property was an excellent piece of ground in terms of location, visibility, accessibility, and market. Our initial plan was to build four flex warehouse buildings to accommodate customers with manufacturing and warehouse space needs along with an office component. In the construction of a very successful flex office building down the street, we felt that some of our tenants had a growing need for a warehouse component with higher ceilings, yet wanted to stay in a higher quality space due to being image conscious.

The topography of the property and the encumbrance of large power lines running diagonally through the site created a design to construct four buildings, ranging from 60,000 SF to 73,000 SF One issue that we found early on was that because of the power lines and township ordinance regarding building sizes in the industrial zone, we were not optimizing our SF to acre ratio. Although not ideal, it did not jeopardize the financial feasibility of the concept, so we moved forward to permitting.

Having done business in the municipality on four other buildings, we were comfortable with the process and with what to expect. We did not have any major neighborhood issues as it was mostly adjoined by other office and industrial product. What was not foreseen, however, would change the feasibility of the project and challenge our assumptions as to the type of product to construct on the site. There was one element to the process we had drastically underestimated.

During the land development process, the supervisors asked the local fire department to review the plans and provide input to the design of the exterior fire suppression systems and water line designs. The buildings themselves were designed with fire suppression systems that were to the township code.

What the fire department recommended threw all of our cost budgeting out the window. It brought a new standard to the forefront. Instead of a traditional water line design with a street main and four to six hydrants for the four buildings, they had designed independent water loops around each building and a total of 14 hydrants. Their argument was redundancy and possibility of water pressure failure making the fires hard to fight. The township agreed with their recommendation and approved the plans with the fire department's suggestions.

My tenants would not have to worry about fire insurance; they would have to worry about the premium on flood insurance. The added cost of the changes totaled about $1 per SF of construction, crossing our threshold for the project and making the concept of constructing the flex warehouse building unfeasible.

In the end, while we were able to seek help from the water company and negotiate the amount of additional water line and hydrants required, the per SF to acre ratio and the financial burden of the additional water line forced us to change our product. Fortunately for us, our choice to shift to build office flex has been a successful decision as the demand for our first building continues to be fantastic.

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