There comes a point when you realise that the warehouse you’re working from simply isn’t sufficient for your business requirements. 

In a previous article we outlined some of the clear signs that your warehouse space isn’t enough to cope with the amount of stock moving in and out of it. We also looked at the steps you could take to deal with the problem without needing to move to a new, larger warehouse. The previous article explained the many reasons why this should really be regarded as a last resort. 

However, even with the persistant call of brand new premises ringing in your head, if you’re seriously considering shifting the base of your operations, it’s important to know how much it will likely cost in terms of initial capital outlay, ongoing costs, and wider business disruption.   

 

Breaking The Costs Down

Of course, each warehouse business is unique in its own right, and specific costs will vary – even down to metrics such as costs per square foot – depending upon factors such as location and the facilities required in the warehouse. That said, however, it is possible to detail, in general terms, the type of budgets you’re looking at for moving to a new warehouse, as well as drawing on expert opinion to estimate the range of the expense such a move is likely to entail. One of the drawbacks of moving to a new warehouse, rather than improving an existing site, is that the full range of costs can sometimes come as a surprise, particularly if the move hasn’t been planned in sufficient detail. 

This article will help anyone considering such a move assess the likely costs in time, resources, and disruption and then decide whether to embark on a relocation project. 

The Cost Of Moving In

The type of costs likely to be involved in moving to a new warehouse facility will include the following:

The Basic Cost Of Moving Into The New Facility 

This is likely to include expenses such as a security deposit, the cost of cleaning the facility and carrying out any improvements/repairs needed, the first month’s rent upfront, the cost of setting up the utilities needed for the warehouse to operate. Depending upon the rental agreement you have in place, these initial costs might also include installing a new or improved security system.

Many warehouses are rented out as basic empty boxes, and in some cases, as well as the costs detailed above, you may need to invest in new construction costs to ensure the space is fully fit for purpose. Be sure you are up for some alterations and improvements if that's what is needed.

Insurance Costs

These are likely to include property insurance as well as minimum and general liability insurance. As with many of the costs involved in moving to a new warehouse, you are highly likely to have been paying these at your existing site, but moving to larger premises may increase those amounts. 

Equipment and Materials Required 

Once again, a larger warehouse is likely to mean investing in more equipment (if not, then there would seem to be little point in relocating). The equipment in question could include racking and shelving, signage, floor covering, office furniture, cleaning supplies, and, in some cases, specialist equipment such as forklift trucks. 

For each of these costs, you should be able to draw up an estimate before any relocation based on your information about the new warehouse and use your knowledge of existing costs as a guide. Initially, an estimate of this kind is likely to be pretty vague. Still, you should be able to firm up the numbers as you gather more details about the new warehouse and the operational changes your shift to the premises will involve.  

The Cost Of Getting Out 

As well as the cost of moving in to new premises, the expense of moving out will need to be factored into your thinking. The first potential expense you’ll need to pay attention to depends on the lease agreement you’ve entered into and any conditions it imposes regarding the condition you’ll be leaving the building. In some cases, you may have an obligation to repair any damage inflicted on the fabric of the building during your tenure, and there may be landlord fees to pay. In addition, the costs linked to contractual obligations of this kind and the costs of moving out of your existing warehouse could include any of the following:

Equipment - Uninstalling and Dis-Assembling

You may have equipment that needs to be uninstalled or disassembled before being moved to the new location. This could include racking or shelving, conveyor belts, lifts, and larger items that can’t be moved without a degree of disassembly.

Equipment And Supplies Required For The Move

This could include moving boxes, trollies, rolling carts etc., as well as packing materials and specialist transportation for certain items.

Cleaning 

You’ll need to leave your current warehouse in as clean a condition as possible, whether you’re ending a lease or own the premises and are hoping to sell them on. The cost of cleaning might include hiring a specialist company to provide a deep clean and paying to remove the refuse from the building. 

Pay Utility Bills

Don't forget to make those final utility payments!

The Big One - Transporting Inventory And Supplies

You’ll also need to factor in the expense of getting all your supplies, equipment, and inventory out of your existing premises, on the road and into your new building.

Since most moves are based on a need for more space, there’s a good chance you’ll have a large amount of inventory that needs to be safely packed and moved to the new facility. The more stock the warehouse holds, the more it will cost to transport - and you’ll want to shift it as quickly as possible to minimise business disruption.

As well as the speed of the operation, factors which could increase the cost of moving the inventory from an existing warehouse to a new building include the distance between the facilities, the nature of the goods being moved and whether they will require any specialised handling. For example, the stock could be fragile, require refrigerated transport because it’s perishable, or pose a danger because it’s flammable. 

Calculating the cost of moving the inventory from one warehouse to the other will require calculating the number of loads involved once individual items have been packed away, how they will be loaded and unloaded, and how much disruption the process will cause to broader warehouse operations. If you’re hiring third-party experts, you’ll need facts and figures that are as precise as possible to be given an accurate estimate of the cost of the move. 

In summary, the costs of moving inventory from one warehouse to another will include transportation costs, the cost of hiring a specialist moving company and/or temporary labour to handle the manual side of moving, any specialist equipment that needs to be purchased or hired to facilitate the move, and the cost of any business downtime caused.      

Building From Scratch. Is There A Case To Be Made? 

In some cases, tracking down an existing warehouse facility that ticks every box and is currently available to rent or buy may prove impossible.

The alternative approach is to build exactly what you need from scratch. This will clearly involve a much larger initial outlay and ongoing costs, but it does come with at least two distinct advantages:

• You won’t be paying rent on a property that isn’t an asset
• The new building will be an investment that you’ll own and which could be leveraged in the future – i.e. sold on or used to raise funds

As with any discussion of warehouse costs, the figures involved will depend on various variables. Chief amongst these will be the location of the planned warehouse. You’ll likely want to be located as close as possible to a range of transport links, for example, but prime locations of this kind are likely to be more expensive in terms of the cost of the land itself, which is only the first of many expenses. 

It’s possible to consult a specialist website such as Checkatrade.com to find estimates of the price per square metre of building the shell of a new warehouse building. We looked, and the costs given by the site at the time of writing were as follows:

• Basic warehouse - £690 to £901 per square metre (an average of £796)
• Large distribution centre - £760 to £1076 per square metre (an average of £918)

In addition to the cost of building the basic shell of a new warehouse, any plans will need to budget for at least some of the following:

• The fees payable for architectural design and any engineering work
• Legal fees for handling aspects such as planning permission
• The cost of any permits required to carry out work of this scale in the chosen location
• Insurance costs 
• The cost of fitting out the warehouse's shell could include lighting, electrics, shelving and racking systems, lifts, staircases, mezzanine flooring, doors, windows, and loading bays.
• Moveable furniture and equipment 
• Health and safety and fire safety infrastructure, such as guard rails, non-slip flooring and alarm systems
• Heating or, if needed, refrigeration systems
• Security systems 
• Any automated systems needed, such as conveyor belts, spiral lifts etc. 

Rounding It All Up - A Good Move? Or Not?

In this article, we’ve examined what might be termed the most basic costs involved in moving to a new warehouse, whether renting or building. 

In addition to these direct expenses, the indirect cost of any such move could include employee relocation, training and onboarding employees in the new facility, and the cost of any business disruption. Our previous article explained why moving to a new warehouse location should only be considered a last resort. 

This breakdown of the potential costs of such a move will give you some insights into exactly why this is the case. Time and again, we’ve worked with businesses to deliver solutions such as mezzanine flooring or new racking and shelving systems, which can transform a space as needed for a fraction of the cost of moving on to somewhere new.