To lease or to purchase a warehouse

To lease or to purchase a warehouse

       India is a growing when it comes to online retail companies. Even multinational companies are targeting the Indian audience. The final breaking news for this year is that Reliance has gotten into digital space. According to Forrester, the ecommerce market in India has grown the fastest within the Asia-Pacific Region at a CAGR of over 57% (2012 to 2016).By 2021 India targets to reach up to 35000 warehouses, 4000 Cold storages and 35000 Agri Storage.

In these industries, manufacturers and online retailers are working towards the same aim, which is, reaching their products to their customers.

For these businesses to thrive, they all need to invest on good storage facilities or warehouses. This makes warehousing a rising industry in India. No matter what your products are, be it food or clothes, warehousing has become one of the most important part of Indian industrialization.

Here we are discussing some major pros and cons of buying vs leasing warehouses.

Pros and cons of buying and leasing a warehouse:

  1. Cost: A warehouse which is rented does not have a fixed rent. The rent might increase. A fixed rate mortgage will always ensure that most of your monthly payments remain fixed. To buy a warehouse you need to invest much more at the initial stage.

In case of leasing a warehouse, you don’t need a very high investment right at the beginning.

  1. Control: As the owner of the property, you have full control over it. You can enhance or change the warehouse according to your needs. But at the same time, you need to take responsibility for everything that happens in your warehouse. An extra management team has to be hired just for managing your warehouse.

While leasing a warehouse you need to worry about the management of the warehouse and you can focus on your business with that extra time in your hands. You can ask the landlord to take of a few things for you in the warehouse.

  1. Finance and taxing: In case of your own warehouse you need to pay off your mortgage and taxes. Taxes and your insurance will be increasing yearly. Being an owner you can claim tax deductions for all costs regarding owning and maintenance of the business premises.

On the other hand, the lease payments will be reduced from your tax income automatically. The money which is not tied up in commercial real estate down payment can be used elsewhere.

  1. Flexibility: With your own warehouse, if your business outgrows your ware, you have to renovate it to fit your business needs.

In the case of leasing a warehouse, instead of renovation, you can get a suitable warehouse for your growing business from the same warehousing company.

  1. Risk: Since you are buying the property your capital is at risk. If the business does not run well then you are forced to sell the warehouse. In this process, you might incur heavy losses.

But there is not much risk involved when you are leasing a warehouse because you are not investing everything behind your warehouse. Plus you can hold any warehousing facility for 8 to 9 years, which gives your business more stability.

  1. Equity: On the event of buying our own warehousing facilities, equity can be used as leverage for the approval of loans.

But the same does not apply for a leased property.

Keeping all of this in mind, investment should be done for warehousing. Clarion group has come up with unique warehousing facilities which have been catering to some of the major industries like ITC and D-mart. They have built-to-suit PLC automated warehousing facilities. Their warehousing focuses on minimal to no human contact, increasing the quality of the goods and products. These warehouses are focus on high and uncompromising quality.