Commercial Real Estate News / Buying / Warehouses for Rent vs. Warehouses for Sale

Warehouses for Rent vs. Warehouses for Sale

Published: 09-18-21 Category: Buying

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

A couple of men walking around a warehouse.

This article was updated on 8/17/23.

The time has come when your business has successfully left the tarmac and is now advancing toward becoming a full-fledged operation. For many budding companies, choosing between a warehouse for rent or a warehouse for sale is a considerable financial decision.

Having adequate space available for storing and even manufacturing products can greatly affect how well your business runs. Still, owners are understandably wary of how warehousing can affect their budgets.

Let's look into the differences between buying a warehouse near you and renting a warehouse.

Pros & Cons of Buying a Warehouse for Sale

Purchasing a warehouse for sale instead of leasing a warehouse for rent for your business requires steady income and decent credit. Even if you're financially prepared to buy a warehouse for sale, how your business will grow and operate can change how cost-effective owning will be in the long run.

#1 – You Own the Warehouse

The warehouse for sale you purchase will be under your name and your LLC. The lack of restrictions can give your operation the freedom to do as much or as little as you want at the site.

As you go about using the space, the regular upkeep and find fast solutions for any irregularities that will likely come up over time. Issues such as roof leaks, mold, and structural flaws fall into your hands. These problems don't come with a timeline, and they can happen when you are at your busiest.

When you're responsible for the structure itself, as you will be when you own, any deficiencies that are not taken care of right away can cause injury or harm to your workers or products and lead to greater trouble.

#2 – You Retain Total Control

Want your office to be accessible to your warehouse? You can install office space and mezzanine structures without asking a landlord for permission when you own your commercial property, creating industrial flex space for yourself.

You have a choice over the type of lighting you install, the layout, pallet racking, and other permanent constructions you'd like to implement.

If you decide to lease out your warehouse as a landlord, your control over your space remains. You will have to take time to oversee that your tenant is following regulations, such as enforcing safety protocols. As the owner, you may be held responsible for accidents that happen because of infrastructure issues. However, you can delegate such tasks to property managers.

#3 – You'll Pay Higher Bills & Likely Have Difficulty Expanding

The costs of maintenance and repairs can be unpredictable when you're owning. When you lease from somebody, those expenses are taken care of. However, landowners can change how much they charge for rent or upend your lease at any time.

When you take out a loan for your warehouse, your mortgage is a stable and predictable expenditure. You don't have to worry about landlords changing agreements or voiding leases. Yet, the upfront costs will be hefty.

The warehouse for sale that you purchase may be perfect for your first few years of business. Your company may develop in ways that require more space, workers, and inventory. As exciting as business growth is, the complications of moving operations to a larger warehouse as well as maintaining financial balance while doing so can greatly hurt your advancements.

Future business progress can end up costing you more when you are handling two warehouses in which one is no longer useful, but you are still having to pay for it.

Pros & Cons of Leasing a Warehouse for Rent

Leasing a warehouse for rent can relieve you from additional responsibilities that come with owning. Depending on the nature and growth of your business, this lack of control can be a hindrance or an advantage.

#1 – You'll Have More Options

Unbound by the large upfront costs of buying a warehouse for sale, your choices for leasing a warehouse for rent will expand as you will be able to have a larger budget. You won't have to take future growth into as much consideration as owners do since you have the option to move warehouses.

Typical commercial leases are 5 years long, which is enough time to set up and test a certain warehouse size. After a lease, you may find that the location or other factors may not be beneficial for your business. You can then find a more suitable warehouse for lease.

#2 – It'll Be Easier to Relocate

The hassle of breaking down and packing is never simple but can be less stressful when you don't have to pay a mortgage for a warehouse you have no use for. The end of your lease gives you the opportunity to re-evaluate your business needs and the flexibility to execute changes.

On the flip side, your landowner can suddenly increase charges or force you out of their warehouse.

#3 – Your Control Is Limited

Although your leasing costs will be significantly lower than owning, so will your control. Your landowner may not give you permission to install changes that could contribute to your operations. Additionally, you may not have to pay for every maintenance and repair charge, but you may be accountable for fees or taxes that come with them.