In the process of managing and expanding production activities, one of the crucial decisions is whether to use a ready-built factory or to construct a new one. Each option has advantages and disadvantages, which is available for the specific requirements and conditions of each business. Below are the considerations to help businesses make the most appropriate decision.

1. Considerations when choosing a ready-built factory or build a new one

1.1. The finances of the business

The finances of the business are the fundamental and most important factor to decide purchasing a ready-built factory or investing in new construction. Ready-built factories typically require less initial capital investment as they already have the necessary facilities and do not require costs for design and construction.

The finances of the business are the fundamental and most important factor

This can help businesses avoid large costs related to hiring architects, construction contractors, and unforeseen expenses during the construction process. Moreover, ready-built factories help save waiting time for the new facility to start operating, allowing businesses to quickly start production and recover capital.

1.2. What stage of development is the business in?

The development stage of the business is the next factor that needs careful consideration. Choosing a ready-built factory can bring great benefits for start-up businesses or in the process of converting their business model.

Ready-built factories provide a quick and cost-effective solution, allowing these businesses to operate without waiting for the construction process. This is important for maintaining cash flow and driving business growth.

Ready-built factories provide a quick and cost-effective solution

For well-established businesses with long-term expansion plans, constructing a new factory can offer greater flexibility in customizing facilities to meet their specific needs, from installing specialized equipment to designing spaces that align with their production processes.

1.3. Purpose of using the factory

According to research by the Jones Lang LaSalle (JLL) Real Estate Institute, businesses often carefully consider the purpose of using the factory to ensure the efficiency of investment and business operations.

If the factory is needed for a short-term project or simple storage purposes, a ready-built factory is a reasonable choice. A specific example is businesses in the e-commerce industry, where the demand for storage can change rapidly based on seasons and shopping trends. These businesses often choose ready-built factories to change flexibly based on their needs.

Ready-built factories are a reasonable choice for short-term projects

Conversely, if a business requires a production facility with complex and specific technical requirements, investing in building a new factory will offer many long-term benefits. Constructing a new facility allows the business to design the factory to fully align with their production processes and install the necessary equipment and technology without being constrained by existing infrastructure. This is especially important for industries such as manufacturing, pharmaceuticals, or high-tech, where technical standards and production processes must be strictly controlled.

1.4. Orientation for future business development

The long-term development orientation of the business is also a factor to consider when deciding between renting and building a factory. Building a new factory provides a significant advantage in adapting to future market and technological changes. For example, a business can integrate new automation technologies into the factory without being limited by the existing structure of ready-built factories.

Building a new factory also allows businesses to easily expand production space when needed, or restructure the space to accommodate new product lines or changes in production processes. This is crucial for maintaining competitiveness and responding flexibly to customer and market demands.

2. Comparison between ready-built factories and build a new one

2.1. Investment time

One of the biggest advantages of a ready-built factory is the ability to be used immediately. This is crucial for businesses that need to start production or expand operations immediately.

In contrast, building a new factory involves not only the time required for design and construction but also the time needed to complete legal procedures, obtain necessary approvals, and secure permits. The time from the start of construction to the completion of the factory can range from several months to several years, depending on the scale and complexity of the project.

2.2. Capital requirements

Building a new factory typically requires a significant financial investment. The costs include not only construction but also design, supervision, and unforeseen expenses.

Additionally, the payback period is often longer due to waiting for the factory to operate. Conversely, a ready-built factory can be a more economical choice for businesses with limited capital, as it allows them to avoid many initial costs and quickly recoup their investment.

A ready-built factory can be a more economical choice for businesses with limited capital

2.3. Flexibility

A new factory provides the highest level of flexibility for businesses in terms of design and space utilization. Businesses can customize from the building structure to the electrical and ventilation systems to meet their specific production requirements.

This is especially important for industries with high technical requirements or needing a specific production environment. Meanwhile, a ready-built factory may not fully meet all business requirements, particularly if the existing facilities do not fulfill the technical or scale needs.

2.4. Ability to optimize area

New factories provide the ability to optimize space usage significantly compared to pre-built factories. When building a new factory, businesses can design each area within the factory to perfectly fit their production processes and machinery installation. This is crucial for industries using large and complex machinery or those requiring a specialized production environment.

For instance, in the manufacturing industry, the ability to design spaces to integrate automation and robotics systems will help increase productivity and efficiency. On the other hand, a ready-built factory may not provide enough space or suitable structure to install and operate these devices effectively.

2.5. Legal procedures

Compared to building a new factory, a ready-built factory often involves fewer legal procedures. When purchasing or renting a ready-built factory, most procedures related to obtaining construction permits and safety inspections have already been completed by the previous owner or developer. This can save businesses time and reduce legal hassles, allowing them to focus on production activities more quickly.

In contrast, constructing a new factory requires numerous steps, including obtaining construction permits and ensuring compliance with labor and environmental regulations. This process is not only costly but can also be maintained, depending on the efficiency of the relevant authorities.

Ready-built factories often involve fewer legal procedures

Conclusion

These factors are clearly worth careful consideration by each business when choosing between renting a ready-built factory and investing in building a new factory. Each option offers distinct benefits and will be suitable depending on the specific needs, financial conditions, and long-term development strategies of each business.

To make the most effective investment decision, businesses need to comprehensively consider factors from costs and time to flexibility and space optimization. Ensuring that the final choice maximizes support for success and sustainable growth in the future.

See more:

Crucial technical specifications to evaluate when renting a ready-built factory

How the growth of industrial real estate is driving increased demand for rental factories

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