Legal Blog

Navigating Tough Lending Markets: Financing Strategies for Warehouse Buildouts

In the ever-evolving landscape of commercial real estate, securing financing for warehouse buildouts can be challenging. It has become increasingly challenging in the current market with persistent inflation, rising interest rates, and tightening lending standards in response to economic uncertainty, geopolitical tensions, supply chain disruptions, and fluctuating market demands. However, navigating these hurdles is possible with strategic planning and innovative approaches. Here’s a guide on how to finance a buildout for warehouse space when faced with a difficult lending market:

  1. Thorough Business Plan: Begin by crafting a detailed business plan outlining your vision for the warehouse space, potential uses, projected cash flows, and return on investment. Highlighting the project’s market demand and potential profitability will be crucial in convincing lenders of its viability.
  2. Build Relationships with Lenders: Establishing strong relationships with lenders is key, especially in challenging financial environments. Research and identify lenders with experience or interest in financing similar projects and contact them directly. Networking events and industry conferences can also provide opportunities to connect with potential lenders.
  3. Alternative Financing Options: Explore alternative financing options beyond traditional bank loans, such as private equity, crowdfunding, or mezzanine financing. These avenues may offer more flexibility and willingness to invest in projects that traditional lenders might overlook.
  4. Government Programs and Incentives: Investigate government programs and incentives, such as tax credits, grants, or low-interest loans, that support commercial real estate development. These initiatives can provide valuable financial assistance and make your project more appealing to lenders.
  5. Collateral and Equity Contribution: In challenging lending markets, lenders may require a higher level of collateral or equity contribution to mitigate their risk. To strengthen your loan application, be prepared to offer additional assets or invest more equity in the project.
  6. Demonstrate Strong Management and Expertise: Highlight your experience and track record in managing similar projects or operating warehouse facilities. Lenders are more likely to trust borrowers who demonstrate expertise and a proven ability to successfully execute complex real estate ventures.
  7. Optimize the Buildout Plan: Streamline the buildout plan to maximize efficiency and minimize costs without compromising quality. Consider phased construction or implementing value engineering techniques to reduce upfront expenses and improve the project’s financial feasibility.
  8. Secure Tenants: If possible, secure pre-leases and/or anchor tenants for the warehouse space before seeking financing. Having committed tenants in place can give lenders added confidence in the project’s revenue potential and decrease perceived leasing risk.
  9. Mitigate Environmental and Regulatory Risks: Conduct thorough due diligence to identify and address any environmental or regulatory risks associated with the project. Proactively addressing these issues can alleviate concerns for lenders and increase the likelihood of securing financing.
  10. Negotiate a Tenant Improvement Allowance: Tenant Improvement Allowances are funds provided by landlords to tenants for tenant buildouts. The amount offered can vary significantly based on the lease length, space condition, and market conditions. A Tenant Improvement Allowance can be particularly beneficial for startups or businesses with significant initial capital expenditures. Should you wish to pursue this option, be ready to present detailed plans and budgets for the proposed improvements.
  11. Consult with Legal Counsel: Seek guidance from legal counsel specializing in commercial real estate finance. Their expertise and insights can help you navigate the complexities of the lending market and identify the most suitable financing options for your specific project.

By implementing these strategies and maintaining a proactive and diligent approach, financing a buildout for warehouse space in a challenging lending market becomes feasible. While obstacles may arise, perseverance, creativity, and strategic planning are key to overcoming them and realizing your vision for the project.

For personalized assistance tailored to your specific needs and circumstances, please feel free to contact Faith Miros or Mark Wendaur. We are here to help you successfully navigate the complexities of your warehouse buildout.


Faith E. Miros is Counsel in the firm’s Real Estate practice group. Faith has extensive experience advising clients on real estate matters related to acquisitions, dispositions, financing, development, leasing and management across all asset classes. Her clients include commercial landlords and tenants, real estate developers and individual investors in New York, New Jersey and Connecticut.

Faith also works with real estate developers in negotiating requisite agreements regarding construction and redevelopment projects. She additionally advises on entity formation, negotiation of agreements of joint ventures and strategic alliances, debt and equity restructuring and reorganizations. She is routinely engaged by sole proprietors, small businesses and national corporations to advise on transactions that include the acquisition and disposition of stock and assets across a broad range of industries. With the ability to draw upon a team of colleagues, Faith also assists clients in industries including hospitality, healthcare, construction, environmental sustainability, banking and finance, tax, corporate and cannabis.