Industrial Feasibility Study: Warehouses, Distribution, Flex, Manufacturing and Cold Storage

An industrial feasibility study tells a lender whether one specific warehouse, distribution center, flex building, manufacturing plant or cold storage facility can lease or operate well enough to pay its debt at the coverage the capital source requires. For a speculative building, the answer rests on submarket absorption and competing supply. For an owner-occupied plant, it rests on the operating company's cash flow and on the program rules that come with SBA or USDA money. For cold storage, it rests on both, plus power and refrigerant costs that a dry warehouse does not carry.

Three facts frame almost every industrial loan file in late 2026:

• Warehouse building has cooled. Private warehouse construction ran at a seasonally adjusted annual rate of $51.6 billion in September 2026, down from a peak of $84.7 billion in April 2023 [1].
• Factory building peaked in 2024. Private manufacturing construction fell to $167.2 billion in September 2026, 17.9% below a year earlier [2], against a September 2024 peak of $249.1 billion [1].
• Cold storage capacity grew in private hands. Gross refrigerated capacity reached 3.99 billion cubic feet on October 1, 2025, and public warehouses held 62% of it, down from 78.7% in 2017 [3].

This page sets out what the study must prove for each industrial property type and how each capital source reads the file. A model study, an illustrative analysis built on public data, applies the method to a public refrigerated warehouse in York County, Pennsylvania, financed under USDA Business and Industry. State pages cover the tax rules that change an industrial operating budget in Georgia, California, Colorado, Illinois, Kentucky, Massachusetts, Michigan and Arkansas.

Every study ends in one of three conclusions: feasible as proposed; feasible with stated conditions, such as pre-leasing, a larger interest reserve, a smaller first phase or a higher equity contribution; or not feasible as proposed, with the changes that would make it work.

What is an industrial feasibility study?

It is an independent analysis, written for the lender's file, of whether a proposed or existing industrial building can support its financing. It covers demand for the space or for the plant's output, competing supply, the building and its cost, the tenant or operator, the financing structure and the cash flow that pays the debt.

Industrial covers five project types that lenders treat differently:

1. Warehouse and distribution. Buildings that store and ship goods. The occupants include general warehousing operators (NAICS 493110), wholesalers, retailers, truckers and parcel carriers [4].
2. Flex and light industrial. Smaller multi-tenant buildings with dock or drive-in loading and more office finish, leased to contractors, distributors, service firms and light assemblers.
3. Manufacturing. Plants built or bought by an operating company in NAICS sectors 31 to 33, usually owner-occupied and often financed with SBA or USDA support [5].
4. Cold storage. Refrigerated warehouses (NAICS 493120) and food plants with freezer and cooler space [4].
5. Build-to-suit and single-tenant net lease. Any of the above, built or bought for one tenant, where the lease and the tenant's credit carry the loan.

The building owner, when it is not the occupant, is a lessor of nonresidential buildings (NAICS 531120) [4].

A feasibility study is not an appraisal. An appraisal estimates value at a date; a study tests whether the project works and what would have to change for it to work. SBA's regulation says SBA "may require professional appraisals of the applicant's and principals' assets, a survey, or a feasibility study" [6]. SBA's procedures list what may cause it to request one, including market saturation by industry type and location, a highly specialized project property and a project size disproportionate to the size of the community it will serve [7]. The same procedures say independent reports, feasibility studies among them, "may be beneficial in mitigating any weaknesses identified in the credit analysis" [7].

USDA is stricter. For Business and Industry guaranteed loans greater than $1,000,000 to a new entity or an entity conducting a new activity, a feasibility study prepared by an independent qualified consultant acceptable to the Agency is required [8]. USDA defines the study as an evaluation of the "economic, market, technical, financial, and management feasibility" of the project [8]. For what separates a study a lender can rely on from one it cannot, see what makes a feasibility study bankable.

What does a lender need the study to prove?

A lender needs proof that the rent or the operating cash flow repays the loan under the capital source's rules, and that the occupancy, the use and the building do not break those rules. SBA's regulation states the standard plainly: "Loans must be so sound as to reasonably assure repayment" [6].

Exhibit 1. What the lender asks and what the study shows

Source: 13 CFR Parts 120 and 121; SBA SOP 50 10 8.1; 7 CFR Part 5001, as cited in each row.

The center of gravity moves with the occupant. A speculative warehouse has no occupant at closing, so the study's weight falls on the submarket: how much space is absorbed each year, how much competing space delivers during lease-up, and what rent new space achieves. An owner-occupied plant has an occupant, so the weight falls on the operating company: its history, its projections, its customers and how the new building changes its costs. A build-to-suit sits between the two. The lease carries the loan until the tenant leaves; after that, the building has to re-lease to someone else.

How large is the industrial economy the study measures?

It is large, and most of it sits in establishments that publish no rent or vacancy. County Business Patterns counted 284,452 manufacturing establishments with 12,335,234 mid-March employees in 2023, and 21,521 warehousing and storage establishments with 1,648,638 employees [9].

Exhibit 2. Industrial employers by industry, 2023

Source: U.S. Census Bureau, County Business Patterns 2023, U.S. file (cbp23us), all legal forms; payroll converted from thousands of dollars [9].

The average general warehousing establishment had about 90 employees, against about 48 for a refrigerated warehouse (calculated from [9]). That gap reflects building size and automation as much as headcount, which is why a study never converts jobs into square feet with a national ratio.

Census counts establishments, not square feet. Two federal energy surveys fill part of the gap. The Commercial Buildings Energy Consumption Survey counted 1,004 thousand warehouse and storage buildings with 17,483 million square feet in 2018, or 18.1% of all commercial floorspace (calculated from [10]). Its 2012 detail splits the stock by use.

Exhibit 3. Warehouse and storage buildings by subcategory, 2012

Source: U.S. Energy Information Administration, Commercial Buildings Energy Consumption Survey, Tables PBA1 and PBA2 (2012 building activity subcategories) [11][12].

Distribution and shipping centers averaged 37.6 thousand square feet, three times the size of a general warehouse, and refrigerated warehouses were larger still at 52.1 thousand [11]. Refrigerated buildings were only 443 million of the 13,077 million square feet [11]. These are national means across old and new buildings. A modern bulk distribution building is many times that size, so the study builds its own competitive set rather than borrowing a national average.

Manufacturing space is measured separately. The Manufacturing Energy Consumption Survey counted 11,270 million square feet of enclosed floorspace across 181,126 establishments in 2018, an average of 69,062 square feet per establishment [13].

Exhibit 4. Manufacturing floorspace by subsector, 2018

Source: U.S. Energy Information Administration, Manufacturing Energy Consumption Survey 2018, Table 9.1; averages rounded to the nearest square foot [13].

Plant size differs by a factor of five between subsectors, and that matters for the collateral case. A fabricated metal shop averaging 43,876 square feet has a deep pool of possible replacement occupants. A primary metals or paper plant averaging more than 200,000 square feet has very few. The study names the pool the subject belongs to and tests what the building would be worth to the next user in it.

How do warehouse, distribution, flex, manufacturing and cold storage projects differ?

They differ in who pays the debt, what drives demand and what fails first.

Exhibit 5. Five industrial project types and what decides feasibility

Source: FSC method; program rules as cited in the sections below.

Speculative warehouse and distribution

The study treats the submarket and the building's size class as the market. A large, tall bulk building competes with other bulk buildings in the same drive-time band, not with an older, lower building next door. The study lists every existing vacancy, every building under construction and every proposed building with entitlements, by size and expected delivery date, and counts any delivery inside the lease-up window as competition. Rent comparables are matched on clear height, dock doors, trailer parking, truck court depth, power, sprinklers and office finish.

Flex and light industrial

Flex buildings carry more office finish and smaller bays, so their main risk is turnover rather than first lease-up. The study models rollover suite by suite, the tenant improvement and leasing cost at each turnover, and downtime between leases. When an owner-occupant finances a flex building with SBA, the leased part is capped by the occupancy rule described below, and the cost of interior finishing for space to be leased to another business is not an eligible 504 project cost [6].

Owner-occupied manufacturing

The building is a cost center for the operating company. The study tests the company's history and projections, the customer base and its concentration, capacity utilization, and how the new building changes rent, utilities, labor and freight. The real estate is then tested on its own for the collateral case: the size, clear height, power and crane capacity that another manufacturer in the region would use.

Cold storage

Cold storage combines a warehouse lease-up question with an operating business. Revenue depends on pallet positions occupied, throughput and handling charges; cost depends heavily on power and on the refrigeration system. The study tests local refrigerated supply against food production and storage in the region, as set out in the cold storage section below.

Build-to-suit and single-tenant net lease

A build-to-suit is tested on the tenant's credit, the lease term against the loan term, renewal and termination rights, and the building's second-generation use. Specialized improvements, such as heavy power, process piping or freezer space, raise the cost to re-lease. The study prices a vacancy and re-leasing case with downtime, re-tenanting cost and the rent a general user would pay.

What happened to industrial construction after 2022?

Warehouse construction peaked in 2023 and manufacturing construction peaked in 2024; both have fallen since, while data center construction kept rising. A study written in 2026 has to place the subject within that cycle, because buildings started near the peaks were still delivering and leasing.

Exhibit 6. Private construction put in place, September of each year (seasonally adjusted annual rate, $ billions)

Source: U.S. Census Bureau, Value of Private Construction Put in Place, Seasonally Adjusted Annual Rate, time series [1].

Warehouse construction peaked at an annual rate of $84.7 billion in April 2023 and was 39.1% lower by September 2026 [1]. That decline is the supply side of lease-up: fewer new buildings deliver into submarkets that absorbed the 2022 and 2023 wave. It does not mean every submarket is in balance. A building takes many months to finish after it starts, so a submarket can show falling construction and rising vacancy at the same time.

Manufacturing construction more than tripled, from $81.1 billion in September 2019 to $249.1 billion in September 2024, and then fell 32.9% to $167.2 billion by September 2026 [1]. Most of the swing came from one category.

Exhibit 7. Private manufacturing construction by type ($ billions, seasonally adjusted annual rate)

Source: U.S. Census Bureau, Value of Private Construction Put in Place, Seasonally Adjusted Annual Rate, time series beginning January 1993; peaks are the highest month in the series [1].

Computer, electronic and electrical plants went from $9.0 billion to $126.4 billion and back to $52.6 billion [1]. A supplier warehouse or a parts plant whose demand case rests on a large nearby factory is therefore tested against what was actually built and is actually hiring, not against announcements. Food, beverage and tobacco plants held at $15.2 billion, more than double their September 2019 level [1]; that steadier line feeds cold storage and food distribution demand.

Data centers are counted elsewhere. Census classifies them as a subcategory of office construction, and private data center construction reached an annual rate of $96.5 billion in September 2026, against $8.1 billion in September 2019 [1]. For an industrial study, data centers matter as competitors for land, power and construction labor, and as demand for nearby flex, contractor and equipment space. The study treats a data center campus as a demand driver only once construction is under way.

Where does industrial demand come from?

Demand comes from goods that have to be made, stored and moved. The study measures the driver that fits the subject: online sales for parcel and fulfillment space, industrial output for plants and suppliers, food production and stocks for cold storage, and local business activity for flex.

Online sales

E-commerce was 17.1% of U.S. retail sales in the second quarter of 2026, seasonally adjusted, against 10.3% in the second quarter of 2019 [14]. Quarterly e-commerce sales grew from $135.5 billion to $340.2 billion over those seven years, an increase of 151% (calculated from [14]).

Exhibit 8. E-commerce share of U.S. retail sales, second quarter of each year (seasonally adjusted)

Source: U.S. Census Bureau, Estimated Quarterly U.S. Retail Sales (Adjusted): Total and E-commerce, time series [14].

The pattern explains part of the warehouse cycle. In the second-quarter figures, the share jumped to 16.3% in 2020, fell back to 14.2% by 2022, and did not regain 16.3% until 2025 [14]. Much of the space planned during the 2020 jump would have delivered into the years when the share was flat or falling. A study uses the share with its Census basis stated: since the April 2025 benchmark, the estimates cover only businesses with paid employees, where earlier releases included nonemployers [14]. It then applies online sales to the subject's own catchment, not to the nation.

Industrial output

The Federal Reserve's index of industrial production stood at 104.0% of its 2017 average in September 2026, 2.2% above a year earlier [15]. Manufacturing capacity utilization was 75.9%, 2.3 percentage points below its 1972 to 2025 average [15]. Within that, output of semiconductors and related electronic components rose at an annual rate of 28.4% in the third quarter [15]. A plant expansion justified by full capacity has to show it in the company's own utilization and backlog, because the national rate shows slack.

Wholesale, trucking and parcel

Wholesalers, truckers and parcel carriers occupy much of the general warehouse stock. Merchant wholesalers alone ran 382,081 establishments with 6,236,357 employees in 2023, and truck transportation another 170,286 establishments [9]. The study ties demand to the occupant types present in the subject's submarket and to their own growth, rather than to a national rule of square feet per dollar of sales.

Where the warehousing jobs are

Warehousing employment is concentrated in a few states. California, Texas and Georgia together held 507,076 of the 1,648,638 warehousing and storage employees counted in 2023 (calculated from [16][9]).

Exhibit 9. Ten states with the most warehousing and storage employees, 2023

Source: U.S. Census Bureau, County Business Patterns 2023, state file (cbp23st), all legal forms [16].

State counts frame the analysis; they never decide it. The study works at the county and submarket level, where one state can hold a tight infill market and an oversupplied outer ring at the same time.

How does the study measure lease-up for a speculative building?

It takes the subject's fair share of submarket net absorption against all the space competing for the same tenants, then tests faster and slower cases. Net absorption, the change in occupied space, is the right measure because gross leasing also counts tenants who simply move from one building to another.

The method runs in five steps:

1. Define the submarket and the size class the subject competes in.
2. Count competing vacant space, and space under construction that will deliver inside the lease-up window, by size and delivery date.
3. Measure annual net absorption for that size class over a full cycle, not only the latest year.
4. Set the fair share: the subject's square feet divided by the subject plus competing square feet.
5. Convert capture into months to lease, and size the interest reserve and carry to a downside case.

The lease-up check below applies that arithmetic.

The check takes three inputs: the subject building's square feet, the submarket's annual net absorption in square feet, and the competing vacant and under-construction speculative square feet. It returns the subject's fair share, the square feet it would capture each month, and the months to lease at fair share and at 1.5 times fair share. The default inputs, a 300,000 square foot building, 3,000,000 square feet of annual net absorption and 6,000,000 square feet of competing space, are illustrative and are not market data. The result is not a feasibility conclusion.

One property of the arithmetic matters for credit analysis. At fair share, the months to lease equal 12 times the subject plus competing space, divided by annual net absorption. The building leases when the whole competing pool would clear. A bigger building does not lease faster, and every extra square foot of competing supply adds time.

Exhibit 10. Months to lease under illustrative inputs (300,000 sq ft building)

Source: FSC lease-up check; all inputs are illustrative assumptions and every result is a model output, not a market fact.

A building that is newer, taller or better located than the competing stock can capture more than its fair share. The study supports a faster case only with leasing evidence from comparable new buildings in the same submarket. Without that evidence, the base case stays at fair share, and the downside case cuts absorption, adds the next proposed building to the pipeline, or both. The last row shows why the downside matters: halving absorption doubles the months to lease.

The months to lease then set the interest reserve, the carry for taxes and insurance, free rent and leasing commissions. The study states the reserve the downside case needs, so the lender can size the loan and the reserve to it rather than to the sponsor's base case.

How does the study treat an existing building or an acquisition?

It starts from what the building has already done. For a leased building, the rent roll replaces the lease-up model: each lease is read for its term, renewal options, expense recoveries, termination rights and assignment clauses, and each in-place rent is compared with what the same space would lease for today. A rent well above market is a risk at rollover, not a source of value. The study sets a rollover schedule by year and prices the downtime, free rent, tenant improvements and leasing commissions each expiry is likely to need.

The building itself is read for remaining life. Roofs, slabs, dock equipment, sprinklers, refrigeration plant and electrical service all have replacement cycles, and an older building's clear height or column spacing can cap the rent it earns no matter how strong the market is. The study carries capital items into the cash flow as reserves rather than leaving them to a separate report.

For an owner-occupant buying a building together with a business, SBA's change of ownership rules apply. The lender's analysis rests on the three most recent year-end financial statements, and the coverage required is 1.25 to 1 for an initial acquisition, against 1.15 to 1 for a business expansion [7]. An existing building financed with SBA also has to meet the 51% occupancy rule from the start [6]. The study shows the occupant's space, any tenant space and the plan for both.

What makes a cold storage feasibility study different?

Cold storage adds an operating business and three costs a dry warehouse does not carry: refrigeration equipment, power and regulated refrigerants. The study tests supply, demand and those costs separately, and then puts them back together in one cash flow.

Supply: capacity grew, and it moved to private operators

Gross refrigerated storage capacity in the United States was 3,987,732 thousand cubic feet on October 1, 2025, up 7.9% from 2023 [3]. All of the growth was in private and semiprivate warehouses, which NASS describes as space used to store the owner's products. Public warehouse capacity, maintained for storing food for others at specified rates per unit, fell [3].

Exhibit 11. U.S. gross refrigerated storage capacity, October 1 (thousand cubic feet)

Source: USDA National Agricultural Statistics Service, Capacity of Refrigerated Warehouses 2025 Summary; shares calculated [3].

That shift matters to a public warehouse project. A food processor that builds its own freezer leaves the market for rented pallet positions, so private capacity growth can shrink demand for public space even as total capacity rises. The 931 refrigerated warehouses counted in 2025 included 476 public and 455 private and semiprivate buildings, and 275 had 5,000,000 cubic feet or more [3]. Freezer space was 3,083,319 thousand of the 3,987,732 thousand gross cubic feet, and usable space was 82% of gross [3].

Exhibit 12. Gross refrigerated capacity by state, 2023 and 2025 (thousand cubic feet)

Source: USDA National Agricultural Statistics Service, Capacity of Refrigerated Warehouses, 2023 and 2025 Summaries; changes calculated [17][3].

Georgia's 76.3% gain in two years shows how fast a state's supply can change, and why the study counts refrigerated space from the latest survey and then adds projects under construction. Pennsylvania's total barely moved, yet the survey's public space there fell from 182,478 to 93,958 thousand cubic feet while private and semiprivate space rose from 45,609 to 134,502 thousand [17][3]. The York County model study works through what that means for a new public warehouse.

Demand: what sits in the freezers

The monthly Cold Storage report measures the stocks that fill refrigerated warehouses. On September 30, 2026, U.S. warehouses held 7,279,316 thousand pounds in freezers and 1,822,497 thousand pounds in coolers [18].

Exhibit 13. Stocks in refrigerated warehouses, September 30 (thousand pounds)

Source: USDA National Agricultural Statistics Service, Cold Storage, released October 23, 2026 [18].

Public warehouses held 6,417,412 thousand of the 7,279,316 thousand pounds in freezers, or 88.2% (calculated from [18]). Stocks rise and fall with harvests, slaughter and prices, so the study uses several years of each relevant commodity's stocks in the subject's region, not one month, and ties them to the food plants the warehouse would serve.

Costs: power, refrigerants and safety

Power is the cost that moves most between sites. Industrial customers paid 9.09 cents per kilowatthour on average from January to August 2026, against 8.50 cents a year earlier [19]. Among the states in the exhibit below, averages ran from 6.77 cents in Texas to 21.11 cents in California [19].

Exhibit 14. Average industrial electricity price, January to August (cents per kilowatthour)

Source: U.S. Energy Information Administration, Electric Power Monthly, Table 5.6.B, year to date through August; changes calculated [19].

On the state averages, a freezer building in Ohio paid 26.3% more per kilowatthour in 2026 than in 2025 [19]. The study prices power from the utility tariff for the subject's load, tests a further rate increase, and shows coverage with and without it.

Refrigerants are the second regulated cost. Under EPA's technology transitions rule, new cold storage warehouse systems with a charge of 200 pounds or more were limited to refrigerants with a global warming potential below 150 from January 1, 2026 [20]. A final rule published May 26, 2026 amended the cold storage limit to 700 until January 1, 2032, and took effect on July 27, 2026 [21]. A study for a project that installs its system before 2032 states which limit applies and what a system change would cost if the schedule slips. Systems that use anhydrous ammonia face a different set of rules: OSHA's process safety management standard and EPA's risk management program both apply at a threshold of 10,000 pounds [22][23].

Exhibit 15. Rules that shape a cold storage project

Source: SBA SOP 50 10 8.1; 13 CFR 120.910; 40 CFR 84.54 (revised as of July 1, 2025); Federal Register, May 26, 2026; 29 CFR 1910.119; 40 CFR 68.130.

How do construction and operating costs enter the model?

Every budget line is cited to a bid, a quote or a labeled assumption, and the study checks the total against how costs and prices have moved. It does not use a national cost-per-square-foot rule.

A cold storage project priced at current construction cost and older storage rates carries any gap between the two straight into its coverage, so the study tests storage rates the local market is charging now.

The rate assumption comes from the term sheet. Where there is none, the study states a benchmark and a spread.

Exhibit 16. Benchmark interest rates, November 9, 2026 (percent)

Source: Board of Governors of the Federal Reserve System, H.15 Selected Interest Rates, release of November 10, 2026 [24].

The SBA 504 debenture rate is "pegged to an increment above the current market rate for 10-year U.S. Treasury issues" [25], and SBA lists the Prime Rate as a base rate for variable 7(a) loans [7]. The study shows coverage at the stated rate and at a higher rate, because a floating rate can move before the permanent loan closes.

Taxes are the third operating line that differs by location. Nonresidential real property is depreciated over 39 years under federal law [26], and state treatment of equipment and inventory varies widely.

Exhibit 17. State tax rules that change an industrial operating budget

Source: state statutes and agency guidance, as cited in each row; details on each state page linked above.

How does the 2025 tax law change the economics of a manufacturing building?

It lets a manufacturer that builds and uses its own plant deduct the production part of the building in the year it is placed in service, if it elects to. Public Law 119-21 added section 168(n) to the Internal Revenue Code, which provides "an allowance equal to 100 percent of the adjusted basis of the qualified production property" [36]. Without it, the same building is depreciated over 39 years [26].

Exhibit 18. Conditions for qualified production property under section 168(n)

Source: Public Law 119-21, section 70307, adding 26 U.S.C. 168(n) [36].

The lessor rule decides who benefits. A developer that builds a plant and leases it to a manufacturer does not get the allowance for that building, because use by a lessee is not use by the lessor [36]. An owner-occupant can. Where an SBA structure puts the real estate in a related holding company that leases to the operating company, the study flags the question for the borrower's tax adviser rather than assuming the answer.

For credit analysis, the allowance changes the operating company's after-tax cash flow in the year the plant opens, not the building's rent. The study shows coverage with and without the tax benefit, because the benefit depends on an election and on the taxpayer's own tax position, and because recapture ties the building's use to the tax result for ten years.

How does SBA treat an owner-occupied industrial building?

As an operating business that happens to own its building. The occupant has to use most of the space, the repayment test runs on the operating company's cash flow, and the 504 limit depends on whether the borrower is a manufacturer.

Exhibit 19. SBA rules that shape an industrial project

Source: 13 CFR Part 120 (revised as of January 1, 2026); 13 CFR 120.931; SBA SOP 50 10 8.1, as cited in each row.

Who counts as a small manufacturer?

Only a borrower in NAICS sectors 31 to 33. The $5.5 million maximum shown on SBA's 504 page [25] is not a general limit. Under 13 CFR 120.931 it applies to each project of a small manufacturer in NAICS 31 to 33 with all production facilities in the United States, or to a project that cuts the borrower's energy consumption by at least 10% or upgrades renewable energy sources [5]. For a warehouse, distribution or trucking borrower, the limit is $5,000,000 [5]. A refrigerated warehouse operator (NAICS 493120) is a warehouse for this purpose; a frozen food processor that runs its own freezer (NAICS 311) is a manufacturer [4]. The job ratio follows the same line: one job opportunity per $150,000 guaranteed for a small manufacturer, against one per $95,000 otherwise [7]. Assisting manufacturing firms in NAICS sectors 31 to 33 is also one of the community development goals a 504 project can rely on [6].

How is the occupancy test applied to a partly leased building?

On rentable square feet. A manufacturer building 100,000 square feet must occupy at least 60,000 from the start and may lease up to 20,000 long term; SBA's procedures allow it to lease the remaining 20% temporarily if it intends to use some of that space within three years and all of it within ten [7]. The study shows the plan in square feet by year. If the business plan does not need the space within ten years, the building is too big for the program.

Which size standard applies?

The one for the occupant's primary NAICS code. Manufacturers are measured by employees and warehouses and truckers by receipts.

Exhibit 20. SBA size standards for common industrial occupants

Source: 13 CFR 121.201 (revised as of January 1, 2026); receipts in millions of dollars [4].

What environmental review does SBA require?

It depends on the property's current and past uses. The lender must compare the NAICS codes of those uses to SBA's list of environmentally sensitive industries; a match means the investigation must begin with a Phase I, regardless of the loan amount [7]. Without a match, a loan over $250,000 starts with at least an environmental questionnaire and a records search with risk assessment [7]. Much of manufacturing is on the list.

Exhibit 21. Industrial NAICS codes on SBA's environmentally sensitive list

Source: SBA SOP 50 10 8.1, Appendix 6, NAICS Codes of Environmentally Sensitive Industries [7].

A Phase I that follows ASTM E1527-21 satisfies EPA's All Appropriate Inquiries rule [37]. The study does not replace the environmental report. It reads it, carries any remediation cost and delay into the budget and schedule, and flags uses on adjoining sites that could limit the next occupant.

SBA feasibility study consultant · SOP 50 10 8.1 update

When does USDA Business and Industry fit a rural plant or warehouse?

When the site is rural and the borrower needs a longer term or a larger loan than SBA allows. B&I guaranteed loans to one borrower are limited to $25 million [8], and terms follow the justified useful life of the assets up to 40 years [8]. The borrower must be engaged in a business, which may include manufacturing, wholesaling, retailing or services [8].

The rural test comes first. "Rural" excludes any city or town of more than 50,000 inhabitants and the urbanized area contiguous and adjacent to it, and "Applications cannot be approved subject to meeting rural area requirements" [8]. A distribution building at the edge of a metro area may fail the test even when the land looks rural.

Exhibit 22. USDA guarantee fees and percentages, fiscal year 2026

Source: USDA Rural Development, OneRD Annual Notice of Guarantee Fee Rates, Federal Register, March 9, 2026 [38].

Equity depends on the borrower. An existing business can meet the test with 10% balance sheet equity or a 10% investment in the project; most other new businesses need 20% balance sheet equity; and a new business with a construction project whose lender wants the guarantee before construction is complete needs 25% [8]. Subordinated debt under a standstill agreement for the life of the loan counts toward equity [8].

Two B&I rules turn directly on the study. The first is the feasibility requirement for loans over $1,000,000 to a new entity or new activity, described above [8]. The second is a market capacity test. A B&I project over $1 million that would increase direct employment by more than 50 is ineligible if it adds production where demand is not enough to employ the efficient capacity of existing competitors, unless it will not harm them [8]. For a new food plant, cold storage building or distribution center in a rural county, the study's supply analysis is the evidence for that test.

USDA feasibility study consultant

How do banks size a speculative industrial construction loan?

Within supervisory loan-to-value limits, with extra capital charged on loans the regulators call high volatility commercial real estate. Bank policy sets the exact terms, but federal rules set the outer bounds.

Exhibit 23. Supervisory loan-to-value limits for real estate loans

Source: 12 CFR Part 34, Appendix A to Subpart D, Interagency Guidelines for Real Estate Lending Policies [39].

A loan that finances construction of income-producing property and depends on future income, sales or refinancing for repayment is a high volatility commercial real estate (HVCRE) exposure [40], and a bank must assign it a 150 percent risk weight [41]. A commercial project is excluded when the loan-to-value ratio is within the supervisory limit and the borrower has contributed capital of at least 15 percent of the real property's appraised as-completed value, among other conditions [40]. That 15% test can decide the sponsor's equity in a speculative warehouse, and the study's lease-up case is what decides whether the loan converts to a permanent loan on time.

Banks also need a valuation. Under the appraisal rule for national banks, a federally related commercial real estate transaction of $500,000 or less does not need an appraisal by a state-certified or licensed appraiser, though the bank must obtain an evaluation [42]. Above that, the rule requires an appraisal prepared by a state certified appraiser [42]. The feasibility study contains no opinion of value; where a lender needs one, it comes from a separately engaged appraisal.

Which financing path fits which industrial project?

The path follows the occupant. Speculative space goes to banks and permanent lenders; owner-occupied space can use SBA; rural plants and food facilities can use USDA.

Exhibit 24. Financing paths for industrial projects

Source: rules as cited in each row; FSC method for what the study must carry.

SBA and USDA cannot both guarantee the same loan, so the program is chosen at scoping. A study built to USDA's five components also answers SBA's questions once an annex adds the occupancy schedule, the job count and the special purpose decision. Compare lender requirements side by side.

How does the study handle a phased industrial park?

It tests each phase on its own and then tests the order. A park with several buildings rarely gets financing for all of them at once; the lender funds the first building and waits for it to lease. The study therefore shows the first phase as a standalone project, with its own share of the land, roads, utilities and stormwater work, and states the leasing level at which the second phase makes sense.

Shared infrastructure is the line most often misallocated. Roads, detention ponds, rail spurs, utility extensions and off-site traffic improvements serve every phase, but the first phase usually pays for them. The study allocates those costs across phases by land area or building area, states the method, and shows the first phase's coverage both with the full infrastructure cost and with its allocated share. If the first phase only works on its allocated share, the sponsor's equity or a public contribution has to carry the rest, and the study says so.

Land carry and timing are tested the same way. Each later phase carries taxes, insurance and interest on land until it starts, and each start depends on the leasing of the phase before. The study shows the park's cash position under the base and downside lease-up cases, so the lender can see when, and whether, each later phase can begin.

What evidence does the study rely on?

Federal data frame the market, and local records decide it. The federal series on this page, from construction spending and County Business Patterns to refrigerated capacity and industrial electricity prices, show the direction of the cycle and the size of each industry. They do not show the vacancy of a submarket or the rent of a building.

For those, the study goes to local records and people. Building permits and certificates of occupancy show what is under construction and what has finished. Planning agendas and zoning cases show what is proposed. Site visits confirm what is built, vacant or being marketed. Owners, tenants, economic development offices and utilities confirm rents, absorption, incentives and power capacity, and every interview is logged with its date and the role of the person interviewed, never their name in the report. Where two sources disagree, the study shows both and explains which one it relies on.

Every figure in a study names its source and period. A figure the study cannot source is either labeled as an assumption, with the reason for the value chosen, or left out.

Which assumptions move coverage the most?

Five or six assumptions decide most industrial files, and the study names them at the start and tests each one.

Exhibit 25. Assumptions the study stress-tests

Source: FSC method.

Each test reports coverage, the reserve needed and the equity needed to keep the loan within the lender's limits. The study does not treat the sponsor's pro forma as a base case; it rebuilds the base case from the evidence and then shows where the sponsor's numbers differ.

What environmental and site rules can stop an industrial project?

Stormwater, contamination, flood zones and hazardous materials are the usual ones. Each can add cost or delay, and a few can make a site unusable for the intended occupant.

Exhibit 26. Federal site rules that commonly affect industrial projects

Source: 40 CFR 122.26 (revised as of July 1, 2025); 40 CFR 312.11; SBA SOP 50 10 8.1; 13 CFR 120.170.

Industrial sites also carry local risks the federal rules do not cover: zoning that limits truck traffic or outdoor storage, utility capacity for power-heavy users, and road access for trailers. The study confirms each with the local authority or utility in writing where it can, and lists anything it could not confirm as a condition.

What must an industrial feasibility study contain?

1. The conclusion first, with any conditions or required changes spelled out.
2. The project defined: square feet, clear height, docks, trailer parking, power, refrigerated area and phasing.
3. Program fit: the occupancy test in rentable square feet, the borrower's NAICS code and size standard, the 504 limit that applies, the special purpose question and, for USDA, the rural test.
4. The market area by drive time, and the submarket and size class the building competes in.
5. Supply: existing buildings, vacancy, space under construction and proposed buildings, by size and delivery date.
6. Demand: net absorption over a full cycle and the drivers that fit the subject, from online sales and industrial output to food stocks.
7. Rent: comparable leases matched on building features, with concessions.
8. Lease-up: fair share capture, base and downside months to lease, and the reserve each needs.
9. For an owner-occupant: the operating company's history, projections, customers and capacity use.
10. For a build-to-suit: tenant credit, lease terms and a re-leasing case.
11. A budget with sources and uses, contingency, interest during construction and working capital, every line cited to a bid, a quote or a labeled assumption.
12. Operating costs: power, taxes and incentives, insurance, refrigerant and safety compliance where relevant.
13. Cash flow and coverage on the capital source's basis, with every downside case.
14. Site and environmental findings, and how they change cost or schedule.
15. Every source and assumption listed, with model outputs labeled as such.

What does an industrial feasibility study cost, and how long does it take?

The fixed fee for an industrial study runs from $8,500 to $16,000, and the study takes 5 to 8 weeks from a complete document set. The fee is set in the engagement letter before work begins. It is never a percentage of the loan and does not change with the conclusion. Specialty scope, such as cold storage or a plant with heavy process requirements, sits toward the top of the band. Estimate your fee.

Documents to start:

• Site location, parcel, site plan and building specifications: clear height, docks, trailer parking, power and refrigerated area
• Development budget or purchase contract
• Leases or letters of intent, and tenant financial statements for single-tenant or build-to-suit deals
• For existing buildings: rent roll and operating statements
• For owner-occupants: the operating company's financial statements, tax returns and projections
• The capital source, loan structure and any term sheet
• Zoning, entitlement and environmental reports already in hand

How the study runs

1. Scoping: confirm the capital source, program, loan size, occupancy plan and the tests that apply.
2. Document intake: budget, plans, leases or letters of intent, and the operating company's statements.
3. Field and market research: site inspection, building survey, lease comparables and the supply pipeline.
4. Model: lease-up or operating cash flow, budget, debt service, base and downside cases.
5. Review: the draft is checked against the lender's questions and revised only for new facts.
6. Final report: signed by Sarrah Allen, MAI, with written answers to the lender's follow-up questions. More about who prepares the study is on the about page.

How can a lender use the study after closing?

As the baseline it monitors against. The study's lease-up schedule, budget and coverage cases give the lender a dated record of what the loan assumed. During construction, draws can be compared with the budget lines and the contingency. During lease-up, signed leases can be compared month by month with the base and downside cases, which shows early whether the interest reserve will last. For an SBA borrower, the occupancy plan in square feet by year is the record against which the three-year and ten-year occupancy commitments are checked [6]. At each annual review, actual coverage can be set beside the study's cases, so a shortfall is explained by the assumption that missed rather than by guesswork.

Download the evidence behind this page's exhibits (CSV, 554 data points with sources)

Who signs your study

FSC Consulting, Inc. is led by Sarrah Allen, MAI, a Member of the Appraisal Institute, who signs every study the practice issues. The certification page names the lead analyst and senior reviewer, the data used and the independence representations, and both sign. The person who signs answers the credit officer's questions after delivery, as part of the fee.

Independence on an industrial file

• No ownership, development or leasing interest in any property evaluated.
• No referral fees from developers, brokers, tenants or lenders.
• No advisory work for the owner of any property evaluated within the prior 24 months.
• Conflicts disclosed in the engagement letter before work begins, with a full retainer refund if the sponsor or lender terminates.
• No advocacy work.

Quality and data

• Four-pass review.
• $1 million errors-and-omissions coverage, with a certificate available before signing.
• Licensed data: CoStar, Esri Business Analyst, Moody's Analytics, IBISWorld and RMA Annual Statement Studies.

More about the practice →