Warehouse developers · Real estate and construction
Warehouse parks built to the cost per square foot they were underwritten at
A warehouse park is underwritten on a cost per square foot and a rent per square foot, and both drift between investment committee and handover. We track capital cost and lease terms building by building, so the yield on each warehouse is measured against the one it was approved on.
In one paragraph
Warehouse developers and platforms buy land, build warehouses and industrial sheds, and lease them to third-party logistics firms, e-commerce companies, retailers and manufacturers. Each park often sits in its own company, frequently with a financial investor alongside, and the chief financial officer reports to both. Unlike an operator, the developer owns the building and earns rent; it does not handle the goods. The finance questions are capital cost, lease-up, yield and investor reporting.
Chief financial officer or head of development, often with the investor's representative
The economics
How the money moves in this trade
A park is acquired, approved and built in phases, frequently with a build-to-suit building for an anchor tenant and speculative buildings alongside. Cost per square foot is set in the investment case. It then moves with specification changes such as floor loading, dock levellers, roof height and fire systems, which the tenant requests and the developer funds against a higher rent. Each park typically sits in its own company, with intercompany funding, development management fees and investor drawdowns running between them.
Leases are long, with lock-in periods, periodic escalations and security deposits, and the rent is the basis for refinancing once the park stabilises. Input tax credit on constructing a building to be let out is restricted, and a retrospective amendment has closed the route a Supreme Court ruling had opened. Tax on construction is therefore part of the capital cost. Three numbers judge the business: yield on cost, its gap to the yield the market pays for a stabilised asset, and the time taken to lease up speculative space.
The problem
Where the numbers usually break down
Capital cost is tracked by park, not by building
Spending is booked to a park-level project, so a build-to-suit building with heavy specification changes and a plain speculative shed carry the same apparent cost per square foot.
Tenant-requested changes are not priced back
Specification upgrades agreed during construction are funded by the developer, but the rent uplift meant to recover them is negotiated separately and seldom tested against the actual extra cost.
Lease-up is assumed, not tracked
Speculative buildings are carried at the lease-up date in the original plan, and the cost of holding vacant space, including finance cost, never reaches the yield calculation.
SPV accounts close late and disagree
Intercompany loans, development management fees and shared costs are recorded differently in each park company, so consolidated reporting to the investor takes weeks of reconciliation.
Non-recoverable tax is left out of underwriting
GST on construction that cannot be credited is booked as a separate expense in some parks and capitalised in others, so cost per square foot is not comparable across the portfolio.
What we do
The work, and the result each part produces
Capital cost by building and package
Land, approvals, civil, structural, roofing, utilities and non-recoverable tax booked to each building against its approved budget.
Every warehouse has a cost per square foot that can be compared with its underwriting.
Specification change log
Each tenant-requested change recorded with its cost and the rent or term agreed in return.
Build-to-suit upgrades are recovered, not absorbed.
Lease-up and vacancy cost tracking
Speculative space tracked from completion to lease signing, with holding cost and finance cost charged to the building.
Yield reflects the time space actually stood empty.
SPV close and intercompany reconciliation
A common chart of accounts and close calendar across park companies, with intercompany balances agreed every month.
Consolidated numbers reach the investor on time and in one version.
Lease abstract and rent roll
Rent, escalations, lock-in, deposits and expiry for each lease, reconciled to billing.
Contracted rent and billed rent are the same number.
Yield on cost reporting
Stabilised rent over full capital cost, by building and park, compared with the approved investment case.
The investment committee sees which parks are earning their case.
Where we start
The first steps of an engagement
Investment cases and cost ledgers
We ask for the approved investment case for each park, construction budgets and contractor bills, the lease agreements, and the trial balance of every park company.
Building-level capital cost
Spending booked at park level is re-cut by building and package, including non-recoverable GST, and compared with the cost per square foot each building was approved at.
Common chart and change log
A common chart of accounts and close calendar is set across park companies. A log starts recording each tenant-requested specification change with its cost and the rent agreed.
Yield on cost by building
The first report shows capital cost per square foot and yield on cost for each building against its investment case, with vacant speculative space and its holding cost.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Capital cost per square foot against budget, by building
- Yield on cost against the approved case
- Speculative space leased against plan
- Specification changes against rent recovered
- Intercompany balances agreed across park companies
- Rent roll reconciled to billing
Who it suits
Written for, and not the right fit for
- You operate warehouses for clients and handle their goods; that is a logistics business, covered on our warehousing operators page.
- You need a statutory valuation of the parks or a statutory audit of the park companies; those are signed by independently engaged professionals.
- Developers building warehouse and industrial parks for lease, with one company per park or per phase.
- Platforms that report to a financial investor or joint-venture partner every quarter.
- Developers moving from a first park to a portfolio and needing comparable numbers across them.
Services
Services this work draws on
MIS and financial planning
Reporting built around the questions you actually need answered.
Explore service ↗Outsourced accounting
Your books kept current and reconciled, closed to a published calendar.
Explore service ↗Costing and profitability
What each product, line and customer really contributes.
Explore service ↗Banking, funding and due diligence
Information a lender or investor can verify without a reconstruction.
Explore service ↗Transaction advisory and due diligence
Quality of earnings, working capital and net debt, under one owner.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
What is the difference between a warehouse developer and a warehousing operator?
A warehouse developer owns the building and earns rent. A warehousing operator runs warehouses, often in leased buildings, and earns storage and handling fees for client goods. The cost structures and the risks have very little in common.
Can you prepare reports in our investor's format?
Yes. We set the chart of accounts and close calendar so the investor's format comes straight from the books, rather than being rebuilt in a spreadsheet each quarter.
Should non-recoverable GST be capitalised?
Where credit isn't available, the tax generally forms part of the cost of the asset, but the treatment should be consistent across every park and confirmed by your statutory auditor. Consistency is what makes cost per square foot comparable.
5th Quadrant maintains park and building-level accounts and prepares investor and lender reporting. Statutory audit, tax-audit reports, statutory valuations and any certificate required from a licensed professional are issued by an independently engaged professional, coordinated through 5th Quadrant. Full detail is on our Professional Scope page.
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