According to recent research, warehouse rental rates escalated dramatically during 2022, with an average increase of 25% for the year.
This spike is largely driven by vacancy rates reaching an all-time low of 3.3% after seven consecutive quarters of phenomenal growth in demand for industrial space.
While this increased activity bodes well for the economy, it’s disheartening for business owners interested in renting a warehouse.
Keep reading to find out how much to rent a warehouse and the factors that impact pricing.
Choosing the Right Warehouse
Most warehouse rental rates depend on square footage. So, it’s important to figure out ways to maximize your use of the space before you commit to more than you need.
You can cut down on the cost of renting a warehouse by stacking palletized products on top of one another or using custom shelving to store items of different sizes and shapes.
Depending on how your inventory arrives at the site, you might need a loading dock or space to accommodate container movement. You might also need conveyors or cranes for unpacking items and moving them around.
All these variables can impact the size and configuration of the warehouse you need.
Once you know exactly how much space you need for storing, loading, and unloading goods, you’re in a better position to avoid overpaying for warehouse rental. Another way to optimize your use of warehouse space is by implementing automatic storage and retrieval systems. These systems can increase your warehouse storage density by utilizing vertical space and reducing the need for aisle space. With automated storage and retrieval systems, products are stored in tall racks and are accessed by machines that retrieve and transport them to the appropriate location.
How Much to Rent a Warehouse Depends on Three Things Factors
It isn’t easy to figure out what it costs to lease a warehouse due to the above variables. These are the main things that will impact the price:
Price Per Square Foot
It’s only logical that you’ll pay more for a larger warehouse. You could also pay extra for facilities such as upscale amenities and extra security.
Warehouses occupying less than 25,000 square feet are generally the most cost-effective and suited to smaller businesses like e-commerce retailers.
Enterprises like exporters, manufacturers, importers, and wholesalers can afford to rent large warehouses of over 100,000 feet.
Most warehouses have a price per square foot. This may vary widely depending on the location of the premises and is the sum of the base rate and operating expenses for the warehouse, i.e:
Price Per Square foot = Base Rate + (NNN + CAM + electricity costs)
Base Rate
The base rental rate is a set price per square foot. It’s usually charged per month and is generally around $0.85 per square foot.
You will agree on a base rate with your landlord at the outset of the negotiations before you sign the lease and secure the warehouse space.
Operating Expenses
Operating expenses are variable costs associated with renting a warehouse. The landlord is not responsible for operating expenses associated with their tenants’ businesses.
These costs include things like security, cleaning, landscaping, and general maintenance. The landlord calculates the total costs and charges them pro rata per square foot rented by each tenant.
There are two types of operating expenses, namely:
NNN (Triple Net Lease)
Also known as Net Net Net, a triple net lease refers to the property taxes and insurance associated with renting a commercial property. The tenant pays these costs on top of the base rent.
NNN is typically quoted per square foot and is usually in line with the cost of living in the area.
San Francisco is currently the most expensive place to rent industrial space in the USA and is also third in the world rankings.
CAM (Common Area Maintenance)
These charges involve maintenance costs for commercial property. These costs pass down from the landlord to the tenant to become part of the total cost per square foot.
Tenants also pay municipal costs for the common areas of the property. These include rates, HVAC maintenance, refuse removal, sewage, electricity, and water.
Additionally, the tenant pays for the cost of water and electricity used for the space they’re renting. Most landlords use a meter system to calculate these costs.
How Does the Billing Structure Impact Price?
When you rent a warehouse, you can usually choose to pay your rent monthly, quarterly, or annually. Most landlords give cheaper rates for annual leases to reduce tenant turnover.
It’s always better to choose an annual option when comparing leases, not only is it cheaper, but it also provides more stability and protection from other would-be tenants.
Cost-Related Questions to Ask When Renting a Warehouse
When renting a warehouse for business, getting clarity about your lease from the outset is vital. Be sure to ask pertinent questions before signing the lease.
This helps you calculate the likely rent more accurately and prevent unpleasant surprises later on. Important questions include:
- Who is responsible for arranging maintenance or repairs?
- Who pays for maintenance and repair costs?
- Who should maintain or replace the building’s HVAC or other fixed equipment?
- Are charges for common areas included in the rent?
- Will the landlord pay for any improvements the tenant makes?
- Who pays for signage on the building?
Unless you’ve got a clear idea of all the above, you could end up with an unpleasant surprise when something needs maintenance.
Getting the Best Deal When Renting a Warehouse
Warehouse rental rates are starting to cool, but you should still take steps to ensure you get the best rates on your business premises.
Some ways to do this include cutting down on your space requirements, signing a long-term lease, and looking for cheaper locations. Although prices in Arizona are increasing in line with the other states, it’s still a cost-effective option when compared to California rentals.
Get in touch to find out how much to rent a warehouse according to your needs in Modesto, Napa, Phoenix, and surrounds. If we don’t have what you want available, we can build it for you.
Give us a call at 1-800-321-8747 to learn more. We look forward to hearing from you!