How much are commercial warehouses selling or leasing for near me and what to expect.
Whether to lease or buy commercial property is one of the most common questions people ask themselves when seeking a warehouse in the lucrative San Fernando Valley. After all, a warehouse costs more than just its monthly rental rate or sale price. The operating expense unknowns are the variables that can lead you to lease, instead of buying. But which decision is best in the long run?
Also, if you are already a warehouse owner, you may wonder if selling commercial property is the right idea. Should you rent it out, instead? The pandemic e-commerce and marijuana industry booms have increased warehouse prices while driving down availability. This creates a great opportunity for anyone seeking to sell commercial property in the San Fernando Valley. If you decide to open up your property to the market, should you sell or lease it?
Answers to both buyers’ and sellers’ questions about the type of transaction to seek comes down to pricing. Obviously, everyone wants to get the most for their dollars. Below, we provide some insights into selling or leasing a warehouse in The Valley of Los Angeles to help you make the right decision for your deal.
Buy Commercial Property or sell in the San Fernando Valley
There are many factors involved in determining fair prices when buying or selling commercial property. Size and location, such as in the lucrative San Fernando Valley, are two of the biggest factors.
Besides the city or region, location also relates to the types of businesses around a warehouse for sale, such as whether it is close to manufacturing companies. Warehouses close to manufacturers are in higher demand than those in a less industrial or rural area. In the San Fernando Valley of L.A., warehouses are key to the booming marijuana industry’s supply chain management. This increases the prices for buying or selling commercial property here. The same is true for e-commerce entities growing rapidly because of the recent pandemic.
At the time of this analysis, the average cost per square foot when you buy commercial property or sell commercial property like a warehouse is about $275 per square foot. At this rate, a small warehouse can go for millions of dollars. A large warehouse might sell for much more. But with more and more companies vying for available space in the San Fernando Valley, these prices will only climb.
When selling commercial property or seeking to buy commercial property, you need to look closely at local comps. These comparables, the price per square foot of similar warehouses in the same area, dictate the price you should seek or pay. Compare each local example’s attributes with your property for the greatest accuracy in using this method.
Leasing a Warehouse in the San Fernando Valley
In an area where you can buy commercial property for $275 per square foot, the leasing rate will certainly differ. But the price for buying or selling commercial property gives you a good starting ground for how much you should pay to lease. The same is true of those all-important comps from the immediate area.
Of course, your lease rate also depends on your type of lease. A triple net or NNN lease is the most common for a warehouse. This lease agreement leaves you responsible for all operating expenses, as the tenant. If you are selling commercial property and use this type of lease, you do not pay operating expenses.
In this scenario, the actual warehouse lease cost is derived from your base rental rate plus average estimated operating expenses. For example, with a average rental rate of $1.50 per square foot, you add the average estimated operating expenses at an example of $0.25 per square foot. This makes the lease’s monthly cost $1.75 per square foot.
Pros and Cons of Buying a Warehouse
There are both benefits and drawbacks when you buy commercial property, instead of leasing.
Pros when you buy commercial property like a warehouse include:
- Tax breaks, such as write-offs for maintenance/repairs and depreciation.
- Easier budgeting and planning with a mortgage
- No rent increases
- The right to make any changes to the property as you want
The cons when you buy commercial property like a warehouse include:
- A sizable down payment is needed.
- You must consider the costs of ongoing maintenance
- You have higher insurance costs, than when leasing
- If your business does not survive, you face greater financial risk than with a lease
Pros and Cons of Leasing a Warehouse
Just as with when you buy commercial property, there are pros and cons for leasing.
For tenants, pros of leasing a warehouse over buying include:
- No major upfront costs, such as the sizeable down payment required to buy commercial property
- Greater flexibility in terms of lease duration
- Ability to scale according to your business growth and a short-term lease
- Some lease types do not leave you responsible for structural repairs or maintenance
Cons of leasing a warehouse space when you can alternately buy commercial property include:
- Potential for increased rent from one lease term to the next
- No control over property disposal, such as its foreclosure or the landlord selling commercial property
- Inability to make changes or additions
Lease-to-Own: An Option to Leasing or Buying
A third option to leasing or buying is a lease-to-own agreement. This method can work great when you are selling commercial property like a warehouse, too. This puts a lease agreement into place for an established period of time. Then, upon the lease end, the tenant has the option to buy the property. This type of agreement allows a business the room to grow into their warehouse commitment. If they decide not to buy at the lease end, the landlord can then choose to lease the property to someone new, extend the current lease or sell commercial property on the open market.
Looking to Lease, Buy or Sell Commercial Property?
If you are seeking to lease, buy or sell commercial property like warehouses in the San Fernando Valley of Los Angeles, California, look no further than TradingCommercial.com. We connect warehouse renters, landlords, sellers and buyers here for seamless commercial property transactions. You can browse the current market for the warehouse space you need, compare rates and reach out to associated commercial real estate agents who know the San Fernando Valley market.