With a pending lease renewal of it’s distribution center, executives at Casio America were evaluating options to contain overall operational costs while continuing to support it’s high levels of customer service. Casio’s existing landlord in Chicago suburban Glendale Heights proposed a 28% increase in base rent in addition to the already escalating expenses of property taxes and OPEX. A relocation option provided the opportunity to explore savings from optimized transportation costs; reduced miles and travel times; and labor pool stabilization.
Andrew Corken, SIOR and Daniel Smolensky, SIOR of The Modal Group were retained once again by Casio senior management to assist in the best potential solutions to reduce costs while maintaining high customer service levels. An extensive review of DC real estate alternatives in the I-80, I-55 and I-88 corridors was conducted and analyzed to determine the best solution based on all operational objectives, with a specific focus on the cost reduction. A state-of-the-art DC was chosen in Aurora, IL and the following efficiencies were achieved by The Modal Group’s client representation model:
- Substantial base rent reduction
- OPEX reduction
- Reduction in transportation miles driven
- Cross dock efficiency with new facility
- Stabilized labor pool
By leveraging the high level of vacancies in Will and DuPage Counties for larger DC’s and exploring the entire West and Southwest regions of the Chicago metro area, the following cost reductions were achieved:
- $735,000 in negotiated reduced rent
- Reduced annual rent escalations
- $285,000 in reduced real estate OPEX(property taxes and CAM charges)
- 6 months GROSS rental abatement
- Turn key new office build out
- Lower labor costs/less labor turnover
- 3-5% lower transportation costs
Over the term of the lease, The Modal Group assisted Casio America in realizing savings in excess of $1,205,000.Optimization of transportation costs, cross dock efficiencies and a stabilized labor pool resulted in additional savings.