You take a step in the right direction and now the business is booming, and demanding space to store all the commodities in one place then opting for a warehouse is the best option. But then there is another issue: whether to buy or rent a warehouse. The year-long debate is still going on. Everything has its upsides and downsides. Today we are here to provide a brief about the pros and cons of buying vs renting a warehouse. And then decide whether you want to rent a warehouse or buy a new one.

What to consider before renting/buying a warehouse?

Before deciding on renting or buying a warehouse, consider the following aspects:

1. How much space do you require?
2. Location. One of the most important factors. Make sure you are close to highways, airways, and railways.
3. Do negotiations on the lease
4. Make sure that you are aware of what kind of space is needed for logistics activities, whether an industrial shed, BTS facility, or a warehouse

Renting a warehouse:

For most businesses, buying is not the first option. Most small to medium-sized businesses generally opt for leasing rather than buying. Plus point of renting a warehouse is you are not tied to a particular location, you can move out whenever the business demands a change of location. Let’s start to discuss some benefits and drawbacks of leasing a warehouse.

• Benefits of renting a warehouse:
  1. Flexibility
     Renting a warehouse can give your business flexibility of expansion/reduction of warehouse space as per the business requirements. Most of the warehouses give the option to expand the space as needed for exercising business activities. This is the best during peak season business. And you only have to pay for the space you use! If you outgrow the business and need much bigger space than before that the current warehouse is unable to offer, the tenant always has the option to relocate. It is easier moving out to a new location rather than buying a new one. Also, it depends on the lessee whether they want to renew their lease or not. By renting a warehouse, you have available capital which can be invested in other business activities enhancing profitability, helping in the growth of the business.
  2. More options:
     There are plenty of options to choose from when considering renting a warehouse for business activities. After determining the essential requirements and amenities such as the layout of the warehouse space, its size, availability of workforce, etc., one can finalize the warehouse at the most prominent location suitable for the logistics operations. All the warehouses of Prime Associates are located at prominent locations, aiding easy transit and continuation of business operations.
  3. Tax deduction:
     One of the major upsides of leasing a warehouse that people tend to forget is tax benefits. When you rent a warehouse, every penny on the rental receipt is tax-deductible. Moreover, if you own a warehouse then it doesn't matter whether it is profitable or not you are bound to pay depreciation tax.
  4. Available Capital:
     When leasing a warehouse, initially only the rental security deposit and rent for the first month is required to be paid. In most cases, the rental security deposit is the same as the lease. When buying a warehouse you have to pay full price for purchasing or at least half of the price of the property for the down payment of the loan. Leasing is the best option for small and medium-sized businesses who need a warehouse as businesses don't have to pay a hefty down payment. So by leasing, you can save a lot of funds that can be further invested in expanding the business. Here, at Prime Associates, we offer competent warehouses for rent at affordable rates.
  5. Little to no maintenance cost:
     In most circumstances, the owners are responsible for paying the maintenance and repairs. Or sometimes maintenance and repair costs are already included in the lease which is minimal charges. Since tenants don't have to pay attention to monthly maintenance and repairs, they can fully focus on the business and make it prosper.
  6. Access to different amenities:
     Occupants can take advantage of all the amenities which warehouse owners offer. Among the required services are parking, security, and safety measures to ensure that the business is well run. All these amenities and more can be yours by renting a warehouse from Prime Associates. Most of the landlords provide additional requirements at the request of the client which ensures consistent business activities.





• Drawbacks of renting a warehouse:
  1. No right over the property
     When a tenant leases a warehouse, have no rights over it. You can not make changes without permission from the owner. He is required to take permission for the following subjects and more:
     • Modification of space
     • Property alterations
     • Addition or removal of any amenity
     • Additional requirements of safety and security measures
     Additionally, at the end of the lease term, before moving out the tenant is responsible for any repairs or damages due to the business activities during the lease period.
  2. The annual increase in the lease
     It is one of the major drawbacks of leasing warehouse space. There are chances that the landlord can increase your rent even before renewal. Which happens quite often. And note here that the lease increases annually too. (in most of the cases)

Buying a warehouse:

When deciding to buy a warehouse remember that you invest a hefty amount of money in a property. The option of buying a warehouse is viable when you don't want to move from a particular location for a longer period. You can also lease out warehouse space for various business purposes/ logistic solutions. After contemplating a lot of factors to buy a warehouse then here are some of its upsides and downside which you should consider:

• Benefits of buying a warehouse:
  1. Total control over the property
     This is one of the biggest advantages of buying warehouse space. As the owner of warehouse space, you are not obliged to obtain permission from anyone concerning the customization, alteration, and remodeling of the property. You can rent out the unused warehouse space, leading to an increase in the business income. This includes the addition of a cold storage facility, the addition of pallet racks, and installing the Warehouse Management System. In contrast, When you rent a warehouse and the landlord does not renew your lease then it's hectic to transfer business to a new place. Which is not a problem when you own a warehouse. You have the full right whether to move or not, and you can grow your business from one place.
  2. Fixed mortgage
     If a business decides to buy a warehouse, it has to have a good credit score to qualify for a down payment. It is required to pay the fixed amount of mortgages with some interest over it every month which lacks flexibility. There might be changes in the interest but it happens rarely. Paying the mortgage value over time, you gain equity over the building which can be used as an asset.
  3. Long-term Investments
     Due to the global pandemic, many physical stores are shifting their facilities to digital sales and many have already shifted. This rapid rise in e-commerce is also increasing the demand for warehousing. If you are an investor looking for a long-term investment then a warehouse could be a better option. Investing in a warehouse can provide higher yields and some other capital opportunities. Moreover, building a warehouse is much less complex than building a residential place or commercial building. In addition, they are low-maintenance properties catching the eye of investors. Furthermore, it can be used as collateral for taking out loans, or as a source of income. And last but not least you can sign longer lease agreements with tenants, the minimum lease is of five years.





• Drawbacks of buying a warehouse
  1. High-down payment
     One of the biggest disadvantages of buying is high upfront costs. Unlike residential properties where you have to pay about 5-6% of the original price as a deposit, in commercial property you have to pay 30-40% of the deposit as a downpayment. For example, if your property costs 100,000$ then you have to pay about 30,000-40,000$ which is a huge amount as a downpayment for medium and small-scale businesses. Mostly, businesses performing humongous operations at the international level tend to buy a warehouse as an investment.
  2. Tied-up capital
     When you are considering buying a warehouse, paying a huge down payment blocks the money for a longer period. And you can not invest in new opportunities in the business and it generates hindrances in the growth of the business. Choosing to rent a warehouse, on the other hand, allows you to utilize the deposit to further advance your business.
  3. Maintenance bills
     By owning a warehouse the business gets the opportunity to customize the warehouse at its own will. But the downside is that the business is liable for all the amenities, maintenance, and repairs. When thinking of giving the warehouse on rent, you have to make sure that you are providing all the basic amenities to the lessee along with the availability of the additional amenities they may demand. On the other hand, if you lease a warehouse you can be free from all these factors like maintenance and repairs since the landlords are liable for such expenses depending upon the terms agreed in the contract.
  4. Risks
     With the expansion of the business in numerous cities, the requirement for warehouse space subsequently rises. It is not possible to buy warehouses at every place, so renting a warehouse becomes a feasible option for continuing the business activities. Additionally, if you decide to sell the property for raising capital, there may be a risk that the customer will take a long time to come on board. It is common knowledge that property value changes over time, so you might not even receive the full amount when you sell the warehouse. However, the property can also yield the opposite results and you can profit from it.

The Bottom Line

Renting and buying have their own benefits and drawbacks. It depends on you to choose one option. Before that, conduct the market research thoroughly to see which option can benefit you the most. But renting a warehouse is a more beneficial option for most businesses. As you can have enough capital to invest in another business, and you have to pay little to no maintenance and repairs. The tenant can solely focus on running the business activities. And here at Prime Associates, we offer you PEB warehouses on rent and at prominent locations with affordable rates. If you are looking for a suitable warehouse for a lease then feel free to contact us at https://www.primeassociatess.com/contact.html we are here to give you the best logistics solutions.