Lease or buy? It’s an age-old question, faced by car buyers and property renters alike. Warehouses can be a huge expense. The price tag can be daunting and lead you to wonder if you should lease one instead of purchasing it- but is it better, in the long run, to make the investment and own the warehouse instead? We’ll walk you through some advantages and disadvantages of purchasing and leasing a warehouse so that you can make an informed decision.
How Much Does it Cost to Purchase a Warehouse?
Warehouse cost will depend on multiple factors, including size and location. Warehouses in areas with a manufacturing background will typically be more expensive due to higher demand for warehouse space, whereas a warehouse in a rural area may be cheaper. The average cost per square foot for warehouse space is around $7.50, so depending on how large you need your warehouse to be, you could pay as little as $11,000 or as much as $800,000.
How Much Does it Cost to Lease a Warehouse?
If the cost per square foot to own a warehouse is around $7.50, then how much is it to rent warehouse space for lease? It depends on what kind of lease you sign, but a common type is a triple net lease or NNN. In this type of lease, the tenant is responsible for all operating expenses. Warehouse rent is calculated using the base rental rate per square foot and the estimated operating expenses per square foot. The average base rental rate is $0.85 per square foot, and the average estimated operating expenses come in at $0.25 per square foot. So the average cost of a warehouse space for lease is approximately $1.10 per square foot.
Advantages of Purchasing Warehouse Space
There are several advantages to purchasing a warehouse. First off, you’ll get some tax breaks. If you own industrial property, you can usually write off expenses such as maintenance and repairs. Secondly, you’ll be able to plan and budget more effectively since you will have a mortgage rather than dealing with potential rent increases, as you may have to when dealing with warehouse space for lease. You’ll also have the right to make any changes to the structure that you see fit, without needing the approval of a landlord.
Disadvantages of Purchasing Warehouse Space
Of course, there are also some disadvantages to purchasing instead of leasing. For one thing, you’ll have a down payment, and those can be pricey. Carefully consider whether or not you have the resources to make this kind of purchase. You’ll also need to consider potential maintenance and insurance costs. Owning a warehouse can be a great position to be in, but it also comes with some big expenses, especially upfront.
Advantages of Leasing Warehouse Space
There are also plenty of advantages to consider when finding a warehouse space for lease. Depending on how your business is doing, leasing may be more cost-effective. You don’t have to deal with some of the upfront costs associated with purchasing warehouse space, including a potentially large down payment- though you may have a security deposit. Leasing also gives you some more flexibility. While purchasing is a huge commitment, leases tend to go for a year or two. So if you’re thinking of expanding or moving your business to a different area in the next few years, finding a warehouse space for lease may be in your best interest so that you have that freedom. Depending on the terms of your lease, you may not be responsible for repairs and maintenance, which could save you time and money.
Disadvantages of Leasing Warehouse Space
There are a few disadvantages to leasing as well, of course. Your landlord may increase your rent with little or no warning, which can mess with the budget you’ve set for yourself and your business. You also don’t have much say in what’s done with the property. You likely can’t make additions or other changes to the space, which can be inconvenient, especially if your business is expanding and you end up needing more space.
Leasing to own is a common arrangement where the tenant rents a property for a set amount of time and has the option to buy it when the lease is up. This can be a great option for a commercial property because it gives you the option to essentially “try out” a space before committing to purchasing it. You might consider seeking out a lease-to-own arrangement if you’re on the fence about staying in the area or if you’re unsure if your business will be expanding over the next few years.
Looking for a Warehouse?
Contact us for help finding the perfect warehouse space 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 336-625-6076 or visit our website.