Buying vs. Leasing a Warehouse: Which is Best?

Many business owners find themselves considering the pros and cons of buying a warehouse. The conversation around buying vs. leasing a warehouse is a common one for business owners because of these pros and cons. Whether or not buying a warehouse is a good idea for a business owner seems to be up in the air. However, we believe it truly depends on your individual situation. In this blog post, we provide insights that will hopefully help you decide whether or not you should buy a warehouse.

Buying vs. Leasing a Warehouse

When you are the owner of a large business that sells products, you likely need a warehouse to operate effectively. Warehouses have the proper equipment and space for you to operate your business and fit your employees. You may need space to store and ship merchandise. Or, you may need a space to actually manufacture products to sell to customers. No matter what it is, selling a large number of goods requires a warehouse to hold them at some point. If you have come to this realization, you may be wondering if the right move is to buy or lease a warehouse. Below, you will find the pros and cons to consider.

Buying a Warehouse

Buying a warehouse is a very big decision for a business owner to make. When you buy a warehouse, it needs to be because you plan on remaining in the space for a long time. Warehouses are a very big investment to make, which means your finances need to be in order before you apply for a loan. However, this doesn't mean buying a warehouse isn't a good idea. In fact, it's a smart investment if you are in the position to make it.

Pros:

• You own the warehouse, which enables you to operate freely.
• Your property will likely appreciate in value, which earns you money when it's time to sell.
• You aren't paying more than what the property is worth, as the landlord needs to make a profit.
• When you are ready to move, you can lease out the space if you want an extra stream of income.
• You don't have to worry about your landlord increasing the cost of rent before you renew your lease.

Cons:

• When you own a warehouse, you are responsible for everything, including the roof, utilities, and machinery if anything ever breaks. With renting, these responsibilities are on the landlord.
• Business success is somewhat unpredictable, so you may grow out of your warehouse, or become too small for it.
• You will most likely need to take out a loan to pay for the property, so you need to have your credit score and finances in check before applying.

Leasing a Warehouse

Buying a property to operate out of isn't as common as you may think. Most businesses operate out of a leased warehouse space, in which a landlord owns it as an investment property. In fact, a large majority of the skyscrapers you see in downtown Salt Lake City are owned by landlords and leased out to businesses. For many businesses and their owners, it just makes sense to lease out a space. Many people don't want the commitment of owning a property, which is completely understandable. After all, when you buy a space, it is likely because you plan on spending several years at the location. This is very forward-thinking for many business owners, as they plan for their businesses to grow quickly.

Pros:

• You aren't tied to the property for decades, or have to go through the selling process.
• You are not necessarily responsible for any issues on the property like air conditioning repairs, pipe repairs, or flooring.
• If your business is booming, you can decide not to renew your lease so you can move into a larger property.

Cons:

• You will have to move your entire inventory, employees, and machinery to a new location if you don't renew your lease.
• Your landlord can increase the cost of rent before you renew your lease, which is very common.
• You won't make a profit on your investment if the property appreciates in value when you occupy it.
• You are somewhat limited to how you customize the space or operate in it depending on your contract's terms and landlord's wishes.

Buying vs. Leasing a Warehouse: Which is Best For You?

We hope this blog post helped you develop an opinion on buying vs. leasing a warehouse for your business. Go over the pros and cons, and consider which is best for your plans and business. If you have any questions about whether you should buy or lease your warehouse, feel free to contact us. We would be more than happy to help answer your questions. Our team helps many business owners with finding the perfect commercial property. From our expertise, we can put you in touch with a property and the ideal contract for your commercial needs.