Your E-commerce business is growing rapidly, and you’ve started to run out of space to keep the stock intact. Or, your current setup isn’t helping in terms of location and is hindering your team’s efficiency, and you are on an explicit hunt for better storage solutions.
Whatever the reason, if you are seriously searching for a suitable warehouse storage facility for your business and are already foraging options—you’ll need to consider many factors before making the final decision. And the crucial factor that’ll come into play would be accounting and measuring the total cost that’d go into renting a warehouse and comparing alternate options to see what would work best for your business.
This article will help you weigh through the warehousing costs and calculations in-depth and the alternative solutions associated with it—to help you make the right decision. Keep following:
Components of Warehouse Cost
It is no secret that landowners and brokers often make renting a warehouse complex by using complex jargon instead of plain English to communicate their pricing options. But in reality, warehouse cost is based on three main criteria – the floor area (square footage), base rental rate, and estimated operating cost.
The Floor Area
The floor area depends on how much space you need for your business and is usually measured in square footage. The area you use for inventory impacts the cost of renting a warehouse.
Note: You can further cut down costs on warehousing by optimizing and making the best use of the available vertical space—reducing total rental costs, big time.
The base rental rate is the amount you’ll pay the landlord, excluding additional operating costs. A base rate is usually charged per square foot on a monthly, quarterly, or yearly basis—as per your lease agreement.
There are two types of operating costs you’ll need to consider before renting a warehouse – Triple Net Lease, also known as Net Net Net (NNN), and Common Area Maintenance (CAM) fees.
1. Triple Net Lease (NNN)
Net Net Net, also known as a triple net lease, refers to the property taxes and insurance fees that you, as a lessee, are supposed to pay besides the base rent—since you are responsible for all the operations happening at the rented property.
2. Common Area Maintenance
Common Area Maintenance (CAM) is the maintenance costs passed down from the landlord to the lessee. Maintenance fees include everything—from management to maintenance of the commercial property.
How is Warehouse Rent Calculated
Did you know in the financial year 2022, the average warehousing rent was 258 Indian rupees per square meter per month in Pune, which was ranked the most expensive among all major cities in India? We’re breaking down the calculations below into three different rental options: monthly rate, quarterly rate, and annual rate–to help you better estimate the warehousing costs specific to your brand:
Monthly Rental Rate
Let’s say your business gets billed every month for warehousing and assume the following:
The storage space you use for warehousing = 1000 sq ft
The base rate = Rs 50 per sq ft per month
NNN = Rs 20 per sq ft per month
Adding up the base rate and NNN (Rs 50+Rs20), you’ll see that your total asking lease becomes Rs 70 per sq ft per month. Just multiply this amount by the square footage of storage, i.e., Rs 1000 X Rs 70= Rs 70,000.
This means you would become liable to pay Rs 70,000 as rent every month at the chosen warehousing space.
Quarterly Rental Rate
Let’s assume the following for quarterly rental rates:
Storage space you use for warehousing: 1000 sq ft
Base rate: Rs 100 per sq ft per quarter
NNN: Rs 50 per sq ft per quarter
Adding up the base rate and NNN(Rs100+Rs50), you’ll see that your total asking lease becomes Rs 150 per sq ft per quarter. Just multiply this amount by the square footage of storage, i.e., Rs 1000 X Rs 150= Rs 1,50,000.
In this case, you would become liable to pay Rs 1,50,000 as rent every quarter or Rs 1,50,000/12 = 12,500 per month.
Annual rental rate
Let’s say you choose the option of yearly billing for warehousing and assume the following:
Storage space you use for warehousing: 1000 sq ft
base rate: Rs 200 per sq ft per year
NNN: Rs 100 per sq ft per year
Adding up the base rate and NNN(Rs 200+Rs100), you’ll see that your total asking lease becomes Rs 300 per sq ft per year. Just multiply this amount with the square footage of storage, i.e., Rs 1000 X Rs 300= Rs 3,00,000.
This means you would become liable to pay Rs 3,00,000 as rent every year for the chosen warehousing space.
Generally, annual billing gives you the most beneficial rate structure, and you’d definitely want to consider this before choosing a warehouse.
Apart from this, make sure to ask your landlord about the additional expenses you might incur, such as electricity, HVAC maintenance, and other operational & repair expenses.
Is Renting a Warehouse Your Only Option?
The simple answer is ‘No.’ Renting a warehousing space is not the only option. While buying your own warehouse can seem very alluring, it’s certainly not possible for most E-commerce brands to make this big of an investment.
You’ll not just become responsible for the maintenance and upkeep of the warehouse but will also be trapped to pay off huge amounts of down payments.
Alternatively, many businesses work with trusted third-party logistics (3PL) providers if renting or owning a warehouse becomes out of the question. 3PL does all the heavy lifting on your behalf by taking care of all your storage and warehousing needs while being cost-effective.
Partnering with third-party logistics providers gives you the flexibility to focus on more important things and take care of all your logistics requirements end-to-end.
If you are looking for warehousing and logistics solutions for your E-commerce business, work with the best in the business. We at ANS Commerce provide fully equipped warehouse facilities across India with cutting-edge warehouse management systems (WMS) and order fulfillment capabilities – pick, pack, dispatch, and return management.
To know more about how ANS Commerce can help you with warehousing and logistics support, book a free consultation today!