Quick facts about warehouse rental space.
Warehouse rental space is critical to today's modern businesses and can offer many benefits for companies of any size. Whether you’re a fledgling company or a well-established organization, warehouse rental space can help you manage your inventory and streamline your distribution efforts.
In this article, we will look at several areas worth considering when looking into buying or renting that precious warehouse space. Somewhere along the line, the decision needs to be made whether to purchase a warehouse or alternatively contact a leasing company that owns warehouse rental space. It can be confusing trying to decide which option is right for you so in this article we’ll take a brief look at some of the things you might want to consider.
We’ll compare whether buying warehouse space or leasing warehouse rental space is more beneficial and what factors may impact that decision. The costs involved are an obvious consideration so we’ll weigh up how the two make sure you make the right choice.
The options available to you may be influenced by your location or finding the optimal location for your storage facility. The strategic planning of where a warehouse could be most beneficially placed is a subject tirelessly poured over by many large organizations. The other important question is how much space do you actually need, should you future proof or be thinking shorter term.
What you should know about buying or leasing warehouse rental space.
Leasing or renting a warehouse comes with many legal obligations. A contract will need to be signed and will stipulate when the agreement should commence and the rent to be paid. Lease agreements generally include many conditions which the lessee must adhere to. These can include insurance requirements, permitted use, alterations, compliance with laws. Also, things such as building regulations, liabilities, rights of entry and defaults, etc are all included as part of the agreement.
When occupying a third party's premises the rules in place tend to be more strict than what you may put in place yourself. There is also a certain amount of uncertainty with regard to the end of the tenancy agreement. You may have invested many thousands of dollars, euros, or pounds in setup costs but come to the end of the agreement your landlord can ask you to vacate the premises. The other concern with regards to renting is that given the correct notice period your landlord can increase rent at any given time.
Purchasing a warehouse has become a very popular option. This can be due to the different purposes the building can be used for. Popular warehouse uses include carrying out your business activities and inventory management. This can include the storage of inventory or as a processing or manufacturing plant. The other popular option is to buy the warehouse as an investment with the aim of leasing it to a third party.
It is however important to be familiar with the pros and cons of warehouse ownership and a good understanding of them is vital before you start your warehouse search. Buying a property also gives you the option to make modifications to the building to suit your business needs. Extending the property as your business expands can improve productivity and also profitability.
On the flip side if the warehousing market were to decline and you have purchased rather than rented you could find your property value also in decline. This could lead to major financial loss if you’d planned to sell during this period.
Purchasing a warehouse strictly for your own use rather than to lease would avoid potential issues that can arise from involving a third party. The necessity to find a suitable tenant can be a major hurdle and delays in doing so could result in additional charges. As the landlord, you could expose yourself to additional costs such as paying insurance, business rates, and maintenance while the property is vacant.
Other things to consider with warehouse rental space and things to consider when buying should include the location of the warehouse. This plays an important part in your business strategy. Whether the location influences your decision will depend largely on what is your business objectives. Whether it be manufacturing, assembly, or storage, different types of businesses all have different priorities to take into account when choosing a location.
Another important consideration is should you use shared warehousing. The obvious benefit to shared warehousing is the cost savings. Cash flow is essential to the survival of any company so running a lean distribution operation and making the most of your allocated space makes perfect financial sense. Sharing warehouse facilities means there is much less likely to be underuse of space if this can be avoided you can effectively maximize the productivity output per square foot of space.
How much does it cost for warehouse rental space?
Costs can vary by a huge amount depending on the space you need and the services you want to include. Warehouses on the market come in all shapes and sizes and the issue is often trying to calculate an accurate figure of the costs before you commit to an agreement.
The subject of rates and fees can be very misleading especially if you consider costs fall into different categories. We’re not suggesting for a minute that landlords and agents deliberately use confusing language but it is safe to say caution needs to be taken when reading the small print.
Warehousing rental costs can be calculated based on your specific requirements. It goes without saying, the more space you need the more expensive it's going to get. The calculation is a relatively simple one as long as you have the correct figures to start with.
As with many services you are charged on a per-unit cost or base rental rate as it is referred to in warehouse leasing. This amount is the figure you’ll pay per square foot of space per month. Billing can be on a monthly or annual basis but the amount is based on how much space you require.
The other costs involved relate to the operating expenses. This can vary but they define the extent to which the tenant is responsible for paying other expenses tied to the property. The landlord on the other hand is not responsible for the costs associated with the running of the facility. Also, a point to remember is that the tenant is responsible for the utility bills which are highlighted in the agreement.
When comparing warehouse properties it is very important to establish who is responsible for which costs. Some of the things you must clarify before signing any agreement include responsibility for the following. Maintenance, repairs, and replacements, etc. Also, will you have to pay for breakout areas or just the operating area? Another point to clear up is will the landlord pay for improvements made by the tenant and any signage that is required.
You should also be aware of the difference between Net leases and Gross leases. Net leases are where the tenant pays a fixed rent to the landlord and the landlord pays the operating expenses. A Gross lease is at the other end of the spectrum where the tenant is wholly responsible for the rent and the other expenses. In between these two opposing schemes are a myriad of variations so you must do your homework.
Warehouse rental space conclusion.
Sourcing warehouse space is a time-consuming stressful process. Buying or renting will depend on your circumstances but must be thought through carefully. Location is key and making the right choice with regards to space requirements can help increase productivity. If your company is seeing continued growth and expansion is necessary the warehouse choice you make should be able to see you well into the future.
