cost to build warehouse
Owning a custom design build warehouse offers significant bottom line cost reductions to a company wanting to utilize a custom warehouse for inhouse business operations. It can also be a good investment for future passive income.
How much does it cost to build a warehouse? Cost to build warehouse starts at the basic metal storage building shell of $7.50 per square foot and ranges between $45 t0 $75 psft for a turnkey warehouse which includes parking, electrical, plumbing, HVAC, insulation as well as other customizable functions.
Whether you are thinking to flip, rent out or use your warehouse for business, building several warehouses together, rather than just one or two will allow you to have all those options. Having several means having multiple streams of rent to pay bills. Selling the whole lot with all warehouses rented out under long-term contracts will attract a good return on your investment too up to 200%! Hire a commercial general contractor or GC to help you with preconstruction phase of feasibility, design and schedule and permits.
Building your own warehouses has significant pros:
- full control over every aspect of the project: land location and zoning, size, layout, ability to offer customization on tenant build out.
- Steady passive long-term stream of income in leasing out. A typical 7 year contract will assure you of a stable income and a long-term opportunity to lease out and make money. Calculator: Taking 30 year mortgage with 3% interest, for a hypothetical total of $2,025,000 ( construction cost) -$405,000( 20% down payment ) = $1,620,000 total mortgage remaining, on a 40,500 sq ft warehouse space, you are looking at paying $6,830 monthly in principal($2,780) and interest($4,050). All additional rental premium is income! To pay off your entire mortgage in 3 years is $45,000 in principal per month. To put in perspective that’s $1.21 per sq ft including interest per month. Figure out the going rate on turnkey warehouse rentals in your area to set your budget and payoff goals. Whether you have an insulated warehouse and amenities determine rent you can charge. Employ a real estate agent to streamline the process of securing good tenants. Because warehouses offer lots of industrial and commercial uses, both local and international, it’s a high demand real estate that fills up quickly with tenants
- tax deductions on the cost of construction and mortgage loans, including principal and interest, on all utility bills, repairs and maintenance thereafter.
- pay only 20-25% upfront using a bank loan. Construction loan financing option offers interest only payments for the duration of construction. Construction loan transfers to a regular mortgage within a few months of construction completion. Many real-estate investors use this smart method of investing third party money.
cons:
- down payment to bank 20-24% projected project cost / loan amount may be all that stands in the way between your choice to build and rent. For example a 40,500 sq ft turnkey warehouse space costs $2,025,000 to build, so your 20% down payment is $405,000.
- wait for construction, 12-18 months on average for a 40,500 sq ft of turnkey warehouse space .
- likely need to wait 3-4 years to break even and start making profit from tenants.
workshops for rent
How much is rent for a warehouse? warehouses or workshops for rent price per square foot varies from $0.45 to $1.50 per square foot per month, depending on the quality, age of the build, location, etc.
pros: upfront savings from not having a hefty down payment
cons:
- rely on owner to allow business use,
- rent increase,
- not easy to find short term leasing opportunities,
- long-term lease over 4 years likely will pass your savings breakeven point compared to building warehouse.
How much does a warehouse cost to purchase?
How much does a warehouse cost to purchase? As mentioned before, warehouse price largely depends on the amenities it offers such as climate control, bathrooms, offices, etc. It also matters who the seller is. An investor will certainly want to make from 50% to as much as 200% profit from flipping a warehouse property. On the other hand you may get lucky and find a company liquidating or downsizing, seeking mostly to recoup money owed to mortgage company.
So lets go over benefits to purchase ready made…
pros: similar to building warehouse, buying warehouse offers
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- tax breaks for mortgage payments, maintenance, repairs, and utility bills,
- predictable budget not reliant on rent increase and freedom to make changes without needing landlord oversight
- potential for passive long-term income
cons:
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- maybe harder to find and since builder/owner wants to make profit, typically costs as much as 2 to 3 times the cost to build a warehouse, especially in a good location at 100% occupancy.
- unlike building yourself, you dont have full control over location, layout and customization.
