Warehouse storage facilities are great for businesses seeking commercial storage for inventory, paperwork and office supplies. Finding the right space depends on your business needs and future growth plans.
When considering a warehouse for sale, consider the following pros and cons to help make your decision. Buying a warehouse can provide stability and growth opportunities through a mortgage payment rather than fluctuating rent increases.
Costs
In general, it’s usually cheaper to rent a warehouse than to purchase one. That being said, both options have their own unique benefits and drawbacks. As such, it’s important to seek consultation from business storage experts when making a decision.
The main cost factor for warehouses is based on square footage. Other major costs are property taxes, insurance, standard area maintenance (such as cleaning or repairs), and utility fees. Rental rates can vary depending on location, so it’s important to compare rates from different providers.
Another big advantage of renting a warehouse is the flexibility to expand and contract as your business needs change. This is ideal for companies that sell seasonal goods, as they may need extra space to store items when sales are high and reduce space once demand is low. In comparison, mortgages typically come with a set amount of upfront payments and long-term contracts that can be difficult to break. This is less of a concern with storage units, as month-to-month contracts can be easily terminated.
Flexibility
The deciding factor between renting and owning warehouse storage is often the company’s ability to finance the purchase or lease of a property. Leasing can be a viable option if a business doesn’t have the budget to pay for a warehouse immediately and a rental contract may offer more flexibility with respect to modifications and design.
Renting a warehouse space also allows for more flexible expansion, meaning companies can scale up or down as needed depending on demand and seasonal trends. Unlike some long-term commercial leases, warehouse storage rental is typically month-to-month or even year-to-year and can be canceled at any time, offering businesses more flexibility in the long run.
Another benefit of renting warehouse space is that it tends to be more recession-resistant than investment real estate and can often hold up better than apartments during economic downturns. With that said, it’s still a risky venture. It’s common for commercial tenants to encounter issues like eviction or default on their leases that can cause occupancy rates to vary and ultimately hurt profits.
Security
Running a warehouse requires significant investment, both up front and in perpetuity. It also requires expertise to ensure it is safe and secure. When you rent from an established warehouse, you can rest assured that all behind-the-scenes requirements will be taken care of by industry professionals around the clock.
Warehousing rental spaces often offer 24-hour access and security gates, so you can be sure that your products are safe at all times. In contrast, self storage rental facilities may be more susceptible to break-ins because they are generally less secure.
Additionally, owning a warehouse storage facility allows you to diversify and add revenue streams that may not be available to renting tenants. You can sell moving supplies and even offer vehicle storage and a tenant protection plan to generate additional income. You can also use your facility to host events or workshops for the community. This can be a great way to get your brand out there and drive traffic and revenue.
Occupancy
For those looking to invest in warehouse storage, a solid occupancy rate is important to help keep expenses down. High performing storage facilities typically operate at over 85% occupancy which results in a stable cash flow for investors.
Renting warehouse space is a great option for businesses that need a large amount of inventory storage or who have oversized equipment. These companies can save money by storing their products vertically, allowing them to maximize vertical space and decrease horizontal square footage, ultimately cutting down overall rental costs.
The biggest downside to buying a warehouse is that it requires a large upfront investment and comes with the risk of property tax increases, insurance costs, and maintenance fees that aren’t always predictable. These costs can make owning a warehouse a difficult decision for some businesses.
