What Are the Benefits of Investing in Warehouse Space?

by Sam Williams ; Updated July 27, 2017
The versatility of warehouse space opens the door to many profit models.

Warehouse space doesn’t just have to be used for storage. Warehouses have been converted into clubs or used as retail space to sell direct to consumers. Manufacturers have turned warehouse space into their base of operations for production on their goods. Beyond versatility, investing in warehouse space can become a lucrative decision for a real estate investor.

Profit

Warehouse space can be profitable as well. If you are not using some of the space, you can rent it out to other small businesses who can’t handle the expense of owning their own warehouse. You can also buy the warehouse for the sole purpose of renting it to others. You don’t even have to use it for your own business for it to be profitable. According to the National Research Council, “Flexible office or warehouse space generally has wider appeal to potential buyers or those willing to sublease excess space; this can mitigate the risk of selling it a financial loss and increase opportunities for selling it at a profit.”

Costs

Owning warehouse space may save money. Rental payments and other recurring expenses from renting a warehouse can exceed what you would have paid for it if you bought the space. For regular storage needs, it may be more cost-effective to buy the warehouse and rent out the additional space you don’t need to others.

Storage

Retail chains can save in-store storage space for products that are selling the fastest instead of crowding space for slow-moving items. Instead of losing out on sales because they can’t store enough products in the store, they can store them in warehouses until the demand increases.

Expansion

Warehouse space gives you room to grow, especially when your business is small. You can use one part of your warehouse for inventory and another side for offices. When your staff grows or your inventory needs increase, you can build walls to add more offices. An expandable warehouse building can give you the option to stretch the walls to pack in more inventory.

Mitigated Risk

Warehouse space is considered commercial real estate. This type of investment may have tax benefits the owner can take advantage of at the local and federal level. Renting the property out reduces the risk if the owner can’t sell the warehouse space for more than he paid for it. Leases tend to be longer than other types of commercial property. It becomes a long-term investment that pays dividends. It can also be used as collateral on other loans and investments.

References

  • “Investments in Federal Facilities: Asset Management Strategies for the 21st…”; National Research Council (U.S.); 2008
  • “Investing in REITs: Real Estate Investment Trusts”; Ralph L. Block; 2006
  • “Buy and Hold Forever: How to Build Wealth for the 21st Century”; David Schumacher, Ph.D., Steve Dexter; 2010

About the Author

Sam Williams has been a marketing specialist and ad writer since 1995. He has been published in magazines such as "Reaching Out" and "Spa Search." He served in various sales and marketing positions with major corporations such as American Express, Home Depot and Wells Fargo. Williams studied English at Morehouse College.

Photo Credits

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