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Tips for Purchasing or Leasing a Warehouse

Searching for a warehouse in Cleveland, Ohio?

If so, this is likely an exciting—and perhaps stressful—time for your business. As businesses grow and expand, procuring new storage and distribution space is a natural next step. But this process can leave business owners with more questions than answers. 

For instance, is it better to purchase or lease a warehouse space? How big should your warehouse be? What’s the ideal location for your new warehouse? 

Below, we have answered these and other common questions, and shared our top tips to keep in mind when purchasing or leasing a warehouse.

Should I lease or buy warehouse space?

There are pros and cons to both renting and buying a warehouse. Purchasing the space upfront may save you money in the long run, but leasing can provide more flexibility and requires less financial commitment. 

Leasing a warehouse requires less upfront capital than buying, as you won’t need to make that hefty down payment. Oftentimes, buildout costs can be amortized into a lease too, leaving precious capital available for building your business rather than your space.  Depending on the terms of your lease, the landlord may also be responsible for certain maintenance and improvement costs. If you think your business may expand or change in the future, leasing will give you more flexibility to move into a new space.

If you’re in a stable industry and have the upfront capital to spend, purchasing your warehouse space can be a smart financial investment. When you own the space, you have the option to customize or expand as needed. You can also turn a profit as the space gains value over time.

How big should my warehouse be?

Calculating how much space you need for your warehouse goes beyond looking at the current size of your business; you also need to estimate how much your business may grow over the years, and plan accordingly. Consider factors such as:

  • What type of equipment will be used in the facility?
  • What volume of product will be stored?
  • What kind of ceiling height do you need? (Based on activities like stacking equipment, inventory or operating large machinery)
  • How much space between columns? What about doors? Cranes? 
  • What are your truck terminal / loading area needs? How many dock doors do you require?
  • Do you have any onsite office or meeting space needs?
  • Sprinklers? Heating? Lighting? Depending on your use, what kind of all of these variables matter!

Keep in mind that space requirements go beyond size. Do you require any additional features, like specialized plumbing or reinforced flooring for heavy loads?

How do I choose the best location for my warehouse?

Location is the golden rule of real estate for a reason: it can have a dramatic impact on your bottom line. Sure, you may have a certain location in mind because you like the neighborhood, but there are factors that can have a real financial effect on your business.

For example, is the warehouse centrally located, and close to highways, ports or cargo docks? Will most of your new “neighbors” be industrial properties as well? With fuel prices on the rise, choosing a warehouse in the right location is a smart investment.

Likewise, is the warehouse close to where your employees live? Is there sufficient parking? If not, these factors may contribute to employee turnover and absenteeism.

What are the costs of leasing or purchasing a warehouse?

If you’re leasing a warehouse, monthly rent will be your primary expense—but it won’t be your only one. Also consider ongoing operating expenses, like insurance, taxes and maintenance. Your landlord may cover some of these expenses, but it depends on the lease. Keep in mind that your rent may change over time.

If you’re purchasing a warehouse, what you can afford will depend on both your upfront capital and mortgage budget. Credit history, cash flow projections, and assets and liabilities can all impact your ability to obtain a commercial mortgage. Additionally, factor in the estimated costs of utilities and repairs. 

Is your business looking to expand? Find a warehouse for sale or lease near Cleveland, Ohio that is suited to your organization’s needs and goals. Contact our team for more information!

To learn more about how CRESCO, Greater Cleveland’s leading commercial real estate company, can help you with your property needs, contact us at 216.520.1200, or fill out the form below. A CRESCO professional will contact you shortly.