5
CHAPTERS

How Much Does It Cost to Buy a Warehouse in the USA?

 

Various types of warehouse properties are uniquely different from one another. This is a major factor in determining property values. Where the property is located in the US and within individual markets can also have a significant impact on its worth.

However, when you examine the established commercial real estate marketing platforms and some of the larger commercial brokerage firms’ websites, you’ll find patterns of valuation that are consistent.

This warehouse cost analysis will give you a good start toward understanding the US warehouse market today. This information will guide you as you determine the type and location of warehouse properties that fit your investing profile.

For additional valuable information about buying a warehouse, read our guide How to Buy a Warehouse as an Investment. And if you are ready to learn about their prices and additional transaction-related costs, read on.

1
CHAPTER

How Much Does a Warehouse Cost on Average?

The distinct markets that emerge from a national search are:

  1. The 3 or 4 largest metropolitan areas by population (New York, NY; Los Angeles, CA; Chicago, IL; Houston, TX)
  2. The remaining cities in the top 50 by population
  3. Markets that are adjacent to US cities.

Properties that are more likely to provide an acceptable investment return are located in areas 2 and 3. Let’s look at the average cost of warehouse space in those locations.

Basic warehouse buildings and older properties with added features that are located in US cities will cost from $625,000 to $750,000 for 5,000 sq ft. Similar properties that are around 10,000 sq ft will cost between $1.25 million and $1.5 million.

City warehouse properties that have added features such as manufacturing facilities will cost anywhere from $875,000 to $1.125 million for 5,000 sq ft buildings. These properties that are in the 10,000 sq ft range will be priced from $1.75 million to $2.25 million.

Good values can be found on the outskirts of these cities in adjacent counties. This is especially true when large highways or interstates connect these markets with the nearby city and other regions. In these markets, warehouse properties with plain shell or older buildings can be had for $300,000 to $400,000 for about 5,000 sq ft. Larger buildings of 10,000 sq ft can cost $600,000 to $800,000.

Higher value properties that have been upgraded, renovated, or contain added features such as hoists/cranes or office space will command prices from around $500,000 for 5,000 sq ft and $1 million for plus or minus 10,000 sq ft.

Advanced properties like climate-controlled and smart warehouses will be priced higher. You can also charge more rent for those properties, but they do require more initial capital.

We found older, lower-priced properties in some of the largest metropolitan areas. The condition of those properties indicated the potential for a significant amount of deferred maintenance. These warehouses should be examined carefully for hidden costs.

2
CHAPTER

What Do Warehouse Prices Depend On?

The value of a warehouse property is impacted by 4 main factors:

  • The property’s location
  • The size of the property — building and land
  • The age and condition of the property
  • The features of the property.

A strong warehouse location will have good access from main highways and at least adequate parking. If it is close to an interstate or large airport, that is a big plus.

The square footage of the existing building obviously affects the price. The size of the acreage is also a consideration. Beyond the initial land value, excess acreage that can be used for expansion can help you increase your investment returns.

A warehouse property’s age and condition have a lot to do with its value. A larger old building may be available for less money than a smaller new one. However, once you’ve paid the bills to bring it up to market standards, you may not have the bargain that you thought.

On the other hand, if that building’s structural condition is sound and will allow for added features, it may be a good investment. By added features we mean:

  • Overhead hoists/cranes
  • Additional HVAC Rooftop Units for climate control
  • Raised floor level or sloping topography for adding loading docks
  • Ability to add mezzanine office space
  • Ability to subdivide into shared warehouse space.

If a warehouse already has some of the features mentioned above, it will be priced into the property’s value.

3
CHAPTER

Average Warehouse Space Cost Per Square Foot

Warehouse price per square foot is a useful metric because warehouses typically have a box shape without offsets or curves. It is a good initial measure when comparing properties that have similar features and uses.

For example, if you see a drastically different cost per square foot compared to similar properties, that’s a signal to ask questions. Are there valid reasons why that property costs more or less than others in the market? Will it ultimately cost the same as the others once you’ve finished repairs?

The larger the warehouse, the less the cost per square foot will be. A 5,000 square foot warehouse cost will be more per square foot than a 10,000 sq ft warehouse cost per sq ft. Although a 200,000 sq ft warehouse cost will be higher overall, the cost per sq ft will be even lower. This is because larger buildings spread the costs over more square footage.

Flex space warehouses, or warehouses that include office areas will break down the warehouse space and office space separately. Each area will have a different cost per square foot.

4
CHAPTER

Closing Costs When Buying a Warehouse

Commercial purchase & sale contracts usually specify that each party pays its own closing costs. The buyer’s costs will include:

  • Inspections (physical property inspection, mechanical inspections, structural inspection)
  • Environmental report (Phase I)
  • Title search
  • Survey
  • Legal fees
  • Title insurance (owner’s policy)
  • If the purchase is financed: loan origination fee, loan broker fee (if applicable), appraisal fee, underwriting fee, and title insurance (lender’s policy).

Many investors will have an appraisal done whether they have a lender or not.

It may be possible for smaller shell properties to be inspected by one person who can handle all the inspection requirements. The cost for a single inspector will probably be determined by the square footage of the building. Usually $1,500 to $2,000 total.

Mechanical inspections will cost about $1,000 to $2,500 depending on the size and complexity of the mechanical, electrical, and plumbing systems.

Structural inspections may be charged by an hourly rate or the size of the building. Expect to pay from $775 to $1,500 for most warehouses.

The size of the acreage will determine the cost of the Phase I environmental report. This could cost from $1,500 to $4,000.

A commercial title search should cost from $500 to $1,500.

Title insurance covers your financial loss from title defects, and the price is based on the price or value of the property. Pricing is a rate per thousand dollars of price/value and is tiered. The larger the amount being covered, the lower the rate per thousand. From $5.50 per thousand for amounts under $150,000 to about $3.50 per thousand for amounts over $250,000.

A lender’s policy covers the loan amount and costs less than an owner’s policy.

The cost of a survey will go up with the size of the land and the type of survey that is needed. An ALTA survey will cost about $1,000 more than a boundary survey. Warehouse Surveys will cost from $1,500 to $3,500.

An attorney may charge as little as $500 for a small shell warehouse purchase using a simple contract, to $1,500 for more complex transactions.

A loan origination fee is usually 1% of the loan amount. Broker’s fees can be that much or more.

Underwriting fees are common and will cost $350 to $500. Appraisals will cost from $2,000 to $4,000 for most warehouse transactions.

A buyer’s closing costs for a warehouse purchase can be from around $8,000 for a small property with no financing to $30,000 or more for a larger property with a $500,000 loan.

5
CHAPTER

Where to Find the Best Rates for Warehouses?

If you, like other savvy investors, are searching either for the best possible deal or something very specific, we suggest that you look for a warehouse at WarehouseCashin marketplace. At our platform, you can find off-market warehouses at affordable rates, including distressed properties whose owners need a fast sale.

Our marketplace’s interface was developed specially for warehouse investors’ needs. It enables you to easily find the desired type of warehouse and type of deal (FSBO, agent-assisted, foreclosure, short sale, and others). You can also view detailed important data that will help you estimate right away how lucrative the investment opportunity is.

About the Author
Marina
Recent Articles
How to Buy a Warehouse as an Investment
Read More
Detailed Guide to Selling Your Warehouse in 2022
Read More