Businesses are building up their e-commerce, and warehouses are a critical part of the supply chain dynamics. As a business owner, you have likely entered the race and already have a warehouse for online order storing inventory. However, did you buy a warehouse or lease it?

There has been extensive debate in the business community about the pros and cons of both decisions. As commercial real estate experts, we are best positioned to consider the factors from a neutral lens and provide perspective.

Hence, this blog will list the pros and cons of both decisions to help you select the right option for your business.

Buying a Warehouse – Pros

Buying a warehouse is a significant investment, no matter how big your company is. It requires extensive inspection, due diligence, cost-benefit analysis, etc., but several benefits can make the process worth your time and money.

1. Control Over Layout, Design, and More

You will have absolute control over layout, design, organization, etc. You can make changes when you want and decide to expand the warehouse. You can also convert it into a multipurpose property with the necessary approvals and plans.

2. Leasing Option if Your Business Moves

Your owned warehouse can continue to earn revenue even if your business moves away because you can lease it to other companies. You won’t have to worry about it only being an additional cost.

3. Additional Equity during Valuation

Purchased property is a part of assets and will reflect equity during valuation. The better the equity, the stronger your financial position, and the higher the confidence in your business.

Buying a Warehouse – Cons

While buying a warehouse is an attractive option, it has its cons.

  1. You will be responsible for all maintenance and repairs while using it.
  2. Any liability for injuries or similar damage to people on the property will fall on your shoulders.
  3. Warehouses are expensive.

Leasing a Warehouse – Pros

Deciding to lease a warehouse can be an optimal decision depending on your business structure and strategy. Following are the benefits:

1. Flexibility

Leasing a warehouse gives you flexibility because you can choose to switch once your lease expires. It is not a long-term asset you need to make plans for, so you only need to concern yourself with it until the agreement lasts.

This flexibility is excellent for developing businesses that need to shift headquarters once they reach a specific size.

2. Potentially Lower Maintenance Costs

Although you will still need to pay several maintenance costs under a triple net lease, you won’t have to pay for all repair costs. Extensive repair costs are usually the owner’s responsibility, and tenants don’t cover them.

Leasing a Warehouse – Cons

You will face a few disadvantages when you lease a warehouse, and they are mentioned below:

  1. You will have higher uncertainty because the owner can choose not to renew the lease, and you will need to buy a different warehouse for your business.
  2. You cannot make layout and design changes to suit your needs without the owner’s approval.
  3. The owner can increase the lease price during renewal, and you can either accept it or find an alternate solution.

Final Thoughts

Overall, you will have an opportunity cost whether you buy a warehouse or lease one, so make a decision that suits your business strategy. Don’t hesitate to contact the CHRE team to find ideal lease partnerships for your business. We have been working in the industry for several years and can help you find the best deals.