Choosing a warehouse building: location criteria

Cheap rent is the brightest number in the advert, so many people choose a building on price alone. But the cost of a warehouse building is not rent alone: it includes delivery of goods, staff getting to work, the technical suitability of the building and room to expand in future. A building on the outskirts that is 15 percent cheaper may swallow more money in delivery than it saves in rent.

One number: total monthly cost

When comparing buildings, compare not the rent but the total monthly cost: rent, utilities, delivery (the number of trips multiplied by the price of one trip), staff travel costs or a travel allowance, and the monthly share of the cost of adapting the building.

An example, with illustrative figures. Two buildings of 3,000 m² each. Building A is on the outskirts, with rent of 51,000 so'm per m² per month, 153 million so'm in all. Building B is closer to the city, with rent of 60,000 so'm, 180 million in all. The difference in rent is 27 million so'm a month in favour of A. But 12 trips a day run from A to customers and markets, and each trip costs an extra 150,000 so'm because of the greater distance. Over 26 working days a month that is 12 × 150,000 × 26 = 46.8 million so'm. So building A saves 27 million a month but loses 46.8 million: a net loss of about 19.8 million a month, around 238 million a year. The "cheap" building turned out to be dearer. If staff commuting costs (a works bus or an allowance) are added for building A, the gap widens further. The reverse is also possible: if most of your customers are large buyers on the outskirts, the result will be different. So take the figures not as estimates but from your own real list of trips.

Location: roads, customers and staff

When assessing location, look at the following:

• the distance to main customers, markets and shops, and the quality of roads;
• how easy it is to reach the city ring road and main highways;
• time restrictions on trucks entering the city, if there are any;
• arrival of imported or transit goods: customs, a rail terminal, the border;
• seasonal congestion, especially before holidays and on market days;
• staff commuting: public transport, shift start times, the journey when working nights.

Look at the surroundings of the building as well: neighbouring businesses, road repair plans, flood risk, vehicles parked along the road. View the building not once but at two different times, in the morning and in the middle of the day, so the real load on the road becomes visible.

Staff are often overlooked. If the building is far away and there is no transport, hiring is hard, turnover is high and this becomes a hidden cost.

Technical criteria for the building

Go to the viewing with this list:

• usable height: the measurement to the lowest beam and to the sprinklers;
• column spacing: how well it suits racking and aisles;
• the floor: flatness and the load it can bear from forklifts and racking;
• the number and height of doors, a ramp or dock, and outside space for trucks to turn;
• electrical capacity: is it enough for lighting, charging and extra equipment;
• the fire safety system and the permits needed;
• the condition of roof and walls: leaks, damp;
• suitability of the building for your type of goods, for example special requirements for food or chemical products.

Terms of the lease

A good building can become a bad choice because of a bad lease. Clarify in advance: the lease term, how the price is indexed (in most leases the price changes over time), whether it depends on a currency, whether you have the right to take the adjacent space or expand, who is responsible for repairs and racking, on what terms the building is returned at the end, and how utility meters are set up and paid for. A short lease lets you change building sooner, a long one keeps the price stable: if growth is unclear prefer the first, if it is clear prefer the second.

Conclusion

A warehouse is chosen not by rent but by total cost: delivery, staff, technical criteria and the lease are all counted. The OmborExpert specialists help compare options in a single table, calculate total monthly and annual cost and prepare a clear conclusion for the manager.