In this article, you will read about the costs of leasing warehouse space, benefits to leasing warehouse space, and other options your small business can take to help growth. As a small business owner, finding out how much it costs to lease a warehouse space is difficult. In this article we will discuss all of the fees associated with leasing commercial space as well as opening your eyes to the overall cost structure of a small business warehouse.
What All Is Part Of Leasing A Warehouse And How To Calculate My Cost?
When it comes to calculating the cost of leasing space there are a variety of factors to consider. Let’s talk about the most common types of leases:
Gross Lease
A gross lease allows the tenant to use the property by paying a flat rental rate. This lease typically is priced at a higher cost because the fees and operating costs are rolled into one. This is beneficial to the tenant because they don’t need to worry about any additional costs associated with working in the space such as utilities, CAM fees, trash, security, or even daily maintenance.
Triple Net Lease
A triple net lease is when the tenant pays rent with the addition of property taxes, utilities maintenance, and even insurance. Triple Net Leases are typically the best for companies that want to invest time into shopping around for the variety of costs, in an attempt to lower their monthly payments.
Modified Gross Lease
As you might have guessed, a Modified Gross Lease is a hybrid between the two. The tenant and landlord agree on which costs are paid between the two parties. This option is a difficult option to assess with 100% certainty as the terms and conditions aren’t concrete from party to party. However, a general pro to a Modified Gross Lease is that there is an amount of flexibility on what expenses you pay as a tenant.
Leasing vs. Buying Warehouse Space
There are always advantages and disadvantages to a specific decision. Below, RISE Commercial District is going to discuss the pros and cons of leasing and purchasing warehouse space. This will hopefully help you place different values on the pros and cons to help drive your decision. One question that you may have is: Is it worth the investment to buy a warehouse for my business vs leasing? To a majority of businesses that we have talked to, they recommend leasing over buying. Unless you are a large corporation with the ability to purchase a space as well as maintain the facility, we recommend leasing.
Pros and Cons of Leasing Warehouse Space
Pros of leasing warehouse space
- Less time is spent on maintenance of the facility
- Flexibility for when you outgrow your space
- Lower upfront cost
- Monthly lease payments are deductible from taxable income
- More time to focus on your business
Cons of leasing warehouse space
- Rising lease rates
- Lack of flexibility to customize the building fully to meet your business needs.
Pros and Cons of Buying Warehouse Space
Pros of buying warehouse space
- Equity in your real estate investment
- Total control of the warehouse
Cons of buying warehouse space
- High upfront cost
- More time and money spent on maintenance of the facility
- Stuck in the warehouse space for a longer period of time due to the ownership commitment
There are a lot of different factors that come into play when you are thinking about the next steps for your business. By understanding the different types of leases, you can understand what option is best for you. The three types of leases that are the most common are a Triple Net Lease, Gross Lease, & Modified Gross Lease.
For most small businesses, RISE Commercial District recommends a Gross Lease. A Gross Lease allows you to focus on your business. With all of the fees incorporated into the monthly lease rate, there is no guesswork with what you are going to pay for that month.
Leasing warehouse space and buying warehouse space are very different business decisions. One of the main factors of buying warehouse space is the large upfront payment that is required to buy. In order for small businesses to remain flexible, leasing warehouse space is recommended.
RISE Commercial District offers a unique gross lease that includes all of the amenities businesses need to run their business including fork lifts, wifi, security and a mailing address to receive shipments and truck deliveries.
Frequently Asked Questions
What is a Triple Net Lease (NNN)?
A triple net lease is when the tenant pays rent with the addition of property taxes, utilities maintenance, and even insurance. Triple Net Leases are typically the best for companies that want to invest time into shopping around for the variety of costs, in an attempt to lower their monthly payments.
What is a Gross Lease?
A gross lease allows the tenant to use the property by paying a flat rental rate. This lease typically is priced at a higher cost because the fees and operating costs are rolled into one. This is beneficial to the tenant because they don’t need to worry about any additional costs associated with working in the space such as utilities, CAM fees, trash, security, or even daily maintenance.
What is a Modified Gross Lease?
As you might have guessed, a Modified Gross Lease is a hybrid between the two. The tenant and landlord agree on which costs are paid between the two parties. This option is a difficult option to assess with 100% certainty as the terms and conditions aren’t concrete from party to party. However, a general pro to a Modified Gross Lease is that there is an amount of flexibility on what expenses you pay as a tenant.
What type of leases do RISE Commercial District offer?
RISE Commercial District typically deals with a Gross Lease. Meaning, we charge one flat monthly fee so you don’t have to worry about add on expenses.
