Unless you’ve enough stock to use a dedicated distributor or your business is agile enough to use drop shipping, chances are you’re storing and shipping either raw materials, finished goods, or both. If your own capacity has been reached or even breached, it makes sense to contemplate outside storage in the short term. Renting third-party warehouse space to cover temporary fluctuations in demand is a cost-effective alternative to moving or extending.
But what happens when weeks turn into months, or even years, with no end in sight? Pallet storage costs can soon mount up on their own, but when you’re factoring in transportation between sites, particularly if those sites are a long way apart, off-site warehousing can soon become seriously expensive, and very inconvenient.
One option to deal with the problem quickly is to buy a temporary building. Delivered in weeks and frequently installed in as little as a few days, provided you have a yard area suitable, a modular building will give you the space you need, on your doorstep, quickly, and for far less than the conventional steel framed alternative. Problem solved, right?…
Well, not necessarily. The trouble is, if your business is not cash-rich, outright purchase won’t be an option and taking on a potentially costly loan for a structure you may only need for the short or medium term is likely to be the last thing you’d want to contemplate. Fortunately, where either of those is the case, there are other options.
When renting a temporary building makes sense
If you’re planning to move or extend in the next year or two and need extra capacity to fill the gap, your most cost-effective solution might be to rent a temporary building. A purpose-built warehouse on your doorstep that goes up in days, is available for install in as little as 4 weeks and gives you the space you need without the inconvenience of off-site storage and the added costs of trucking goods between sites. What’s more, with rental terms typically starting from 12 months, you can be assured of a degree of flexibility, without the capital outlay of purchasing the structure.
On the downside, once the space exists, it’s very hard – short of downsizing your business – to give it up again. In the event of a delay to a planned site move, or the demand for ever more capacity as your business grows, that initial 12-month rental may not be long enough. Invariably, we find that a client renting a building for 12-months will end up requiring that structure for a period of several years, by which time the cost of rental has far exceeded the original purchase price.
So, whilst a temporary warehouse can represent an excellent return on investment when rented for a year or two, beyond that, with the space created invariably essential to the business and the overall cost mounting, rental loses any advantage.
What’s more, with increased material costs meaning your end-of-term rental unit is still worth an even larger chunk of what its value was new, and with those monthly rental payments not counting towards the cost of purchase, long-term rental rarely, if ever, stacks up from a financial perspective.
Finance leasing: a happy – and cost-effective – medium
With a finance lease, not only is the overall term cost typically far lower than renting over a similar period, but once tax relief against your monthly lease payment is factored in, the actual cost of ownership, should you opt to buy at the end of the term, is usually less than with outright purchase – just with payment spread over 2 – 5 years.
At the end of the lease term, you will be given the opportunity to own the building outright, with a purchase price that typically equates to a single month’s lease payment with a modest administration fee (usually only a few hundred pounds) for transfer of ownership.
Alternatively, if you’re certain the building won’t be required long-term, you also have the option to rent the structure for a further 12 months, usually for the same monthly payment as with the original lease agreement.
If you’re looking for flexible, temporary or semi-permanent space, don’t want to pay over the odds, and may want the opportunity to own the building in future at a sensible price, contact us here or call us on 01487 840 840.
