Having a warehouse is a vital step in growing your business. It can maximize your overall business efficiency and minimize production times and delivery costs. It allows you more control over your processes, from production to fulfillment, thus making business decisions easier. If you are serious about expanding your business, you’ve surely thought about leasing warehouse space. We will discuss the advantages and disadvantages of leasing warehouse space and this will help you determine if leasing is the best option for your business.
First, we will take a look at the advantages.
There are more commercial properties available for lease than there are for sale. You can look for the location, size, and specifications that match your business needs.
Smaller Cash Payment
If you consider the short-term value of the expense, leasing warehouse space requires a smaller cash payout for a certain period. If your cash flow is still not consistently strong, leasing warehouse space might be the best route for you. The money you’ve ‘saved’ can be used for other parts of your business that you want to grow, such as inventory or equipment.
Deductible From Taxable Income
You can deduct the amount of your monthly lease payments from your taxable income.
After the lease period, you can choose to either stay or move to a warehouse that better suits your needs. If the warehouse space doesn’t work for you anymore, there’s no need to renew your lease.
Focus on Business
Running a commercial property requires different expertise and might not be your company’s forte. Leasing warehouse space allows you to use your focus completely on your business instead of learning the ropes of overseeing commercial property.
Next, let’s look at the disadvantages.
Rising Lease Rates
Rates are usually subject to annual increases unless otherwise stipulated in your contract. This is an expense that you should have some flexibility in. Find out the standard rate increase in your area, and integrate it into your accounting books.
Limited Opportunity for Expansion
If there comes a time when your business has outgrown your warehouse capabilities, it will be harder to expand it if you are leasing warehouse space. Your landlord might have limitations to the changes that you can make.
You have no influence over business decisions that your landowner makes. If he decides to sell his property, even if you want to renew your lease, you can’t anymore. Having to move unexpectedly can hurt your business financially.
You have no control over the rules that your landlord makes. This can be a hindrance in designing the perfect space for your business needs. If you are in a multi-tenant location, you also do not have control of how the landlord makes use of the space that is not yours. He might make decisions that are not in line with your brand plans.
Loss Of Value On Improvements
In many instances, contracts between tenant and landlord stipulate that any improvements made by the tenant inside the leased area will become the property of the landlord. This means that any improvement that you cannot take with you, such as paint or tiles, will benefit the landlord but will not be paid to you.
Deciding on buying or leasing warehouse space is a major business decision. Before deciding, read about the advantages and disadvantages of each option and match them with the strengths and weaknesses of your business.
Are You Looking For Warehouse Space For Lease?
Contact us for help finding the perfect industrial property for lease or purchase! Schwarz Properties specializes in commercial and residential property management in Virginia, South Carolina, and North Carolina. We lead the market for industrial and warehouse spaces for lease and our portfolio also includes retail space, restaurant space, residential, office space, and many more. Please contact Schwarz Properties at 336-895-1336 or visit our website.