Enough work goes into organizing, running, and managing a warehouse that one giant factor can go overlooked: where do you get the warehouse itself from?

Commercial real estate can come with its own set of headaches, and when it comes to finding warehouse space you might find yourself getting overwhelmed quickly. Don’t despair: we’ve got a few simple tips here to help you figure out if renting or buying your own warehouse is the best way to go for your business:

Buying a Warehouse

Pros:

• Fixed costs: Mortgages tend to have less rate fluctuation than rental rates do, ensuring your monthly rate remains more consistent over time.
• Control of the property: Having ownership of your own warehouse facility means you have more control over how the building is set up and laid out. Renovations such as mezzanines and new warehouse shelving are entirely up to you and any partners you have in charge of the facility, without having to talk to a landlord.
• Equity: As your business grows in value and the worth of your property increases, you can use this equity as leverage for obtaining loans, funding, and other business dealings the same way you could with the mortgage on your home.

Cons:

• High upfront costs: Buying a warehouse requires a lot bigger initial investment than renting does, and the money needed for both a payment on the property and the cost of any needed equipment or renovations may better suit your business being spent elsewhere.
• Increased financial risk: Not only will property taxes and insurance likely increase from year to year, there’s the chance that you will have to sell the property for less than the purchase price in the event of financial issues.
• Maintenance bills: The flip side to having total control over your own building is that you’re also on the hook for all the maintenance and upkeep it requires. Keeping the time and resources available to invest in building improvements may prove detrimental to your business down the line.

Renting a Warehouse

Pros:

• More options: Generally speaking there will be a wider array of facilities available for rent than there is for sale, giving you more choice in the size and type of warehouse you go with.
• Less time spent on management: Having a landlord or property management company to handle a lot of the behind-the-scenes aspects of running a warehouse leaves you more time to focus on your business.
• Easier to relocate: If you outgrow your facility or find yourself requiring a new location for whatever reason, renting makes it far easier to pack up and move than it would be if you were responsible for the entire warehouse.

Cons:

• Lease increases: Commercial leases are generally subject to annual rent increases, as well as increasing costs whenever the lease is renewed.
• Less control of the facility: While a lot of the day-to-day operations are being managed for you, you have much less control over the decisions of the property owner and may be subject to things like rate increases and/or relocation if they decide to not renew your lease.
• Limited growth: If your business finds itself expanding faster than projected, it’s going to be far more difficult (if not impossible) to modify the current facility to meet your needs and may require a costly relocation instead.