When new companies outgrow their current workspaces, they look to develop warehouses that expand and streamline their distribution and delivery processes. With rising e-commerce demands, industrial warehouses have become one of the most resilient assets in the real estate industry.
Due to companies' wide range of products, warehouses increase logistics efficiency in retail. The warehouses scale shipping processes and ensure product availability with minimal backorders.
Warehouses are large and complex projects. We will discuss the costs of building a warehouse and how you can effectively maximize the available space.
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Warehouse cost by size and square feet
The average costs of building a warehouse are $20 per square foot for the shell building. For small warehouses of 40 by 60 ft, the prices can be as low as $150000. However, for big warehouses of about 50000 square feet, the prices shoot up to $3,125,000. The price is affected by the size of the warehouse, the type of materials, delivery costs, and construction methods.
Below is a rough estimate of warehouse costs based on size and price. We sourced the following data from Strong Building Systems.
|Dimensions||Square feet||Turnkey Estimate|
The shell building consisting of a concrete slab base costs about $20 per square foot, whereas the steel building framework from $7 to $12 depending on the gauge of steel used for construction. The costs in the table above are inclusive of land and grading. It will decrease overall construction costs if one can obtain land and grading for significantly lower prices.
Costs to consider
Various costs encompass the construction costs of a warehouse. These are hard, soft, financing, and operational costs.
Soft costs are among the hardest to estimate. Soft costs are not directly linked to the construction but are necessary for the project's operations. Soft costs include permits, taxes, insurance, engineering and architectural design, and moveable equipment. If unplanned, soft costs can bring a project to a halt as they are unique in every project. Their uniqueness is part of the reason why they are difficult to estimate.
Hard costs are all the cumulative expenses directly linked to the physical construction. They are the foreseeable construction costs. Some of these costs are labor and materials. As much as these costs appear easily predictable, they fluctuate depending on the market conditions. Other hard costs include site development, grading, and landscaping.
One of the most critical construction costs is financing costs. Most clients finance their projects using loans. Owners, therefore, need to carefully assess anticipated costs and weigh whether they are receiving good value for money from their lender's loan. There are three types of financing in warehouse construction. The first is the short-term construction loan, which an owner takes to cover project costs before obtaining long-term funding. The second funding type is bridge financing. A client secures this loan to pay off a standing construction loan. The final financing type is the permanent takeout financing that the client takes to finance the project in the long term.
These refer to ongoing costs such as maintenance, utility bills, and upkeep. These costs dramatically fluctuate over the lifetime of a project. For instance, you can reduce your electricity bills by upgrading and insulating your warehouse. The upfront costs will be high, but your monthly fees will reduce in the long run. Other long-term expenses include property management, taxes, and insurance.
Concrete Foundation Costs
A concrete foundation supports all warehouses. They are not uniform concrete slabs like the ones an average house has. The concrete foundation is anchored with rebar to support the structure from wind and seismic activity. Concrete slab foundations cost about $6 per square foot.
What impacts the warehouse building costs?
The construction of a warehouse is a significant infrastructure investment. One needs to analyze various factors that affect warehouse building costs carefully. Some factors that impact warehouse building costs are warehouse type, location, and design. Below are some of these considerations.
There are initial considerations that have an immediate effect on costs. These are the volume of goods you intend to store in your warehouse, access points to market outlets, accessibility by staff members, and future scalability of the warehouse. Your warehouse location affects its accessibility to the market, transportation costs of goods, and land acquisition costs.
Scope of Construction
Your project's scope also affects construction costs. The size of your construction project is one of the most significant factors driving construction costs. In an already constructed warehouse, the prospects of expanding scale up the construction costs. The scope of the project is coupled with the complexity of the project. The more the complexity increases, the higher the prices shoot up as the labor and material costs increase.
Use case of the building
The type of use brings in different designs for efficiency and gives better low-cost alternatives. A common consideration in warehouse design is cold storage. Some distributors and retailers need warehouses with cold storage if they deal with perishable goods. Incorporating cold storage leads to manipulations of the basic design as it will be necessary to add more rooms and facilities to accommodate the new designs.
The design team should design a warehouse to foster a good work environment. With different designs come different types of warehouses. Some warehouses to consider are humidity-controlled warehouses and refrigerated warehouses. Either of the warehouses mentioned above increases the material and labor costs as the architectural and engineering costs increase. The design needs to be precise to accommodate these functionalities.
The complexity of your architectural design increases with the type and volume of goods stored in a warehouse. If one has different kinds of goods with varying storage requirements, building a warehouse with multiple rooms might be necessary to accommodate various storage requirements. This will increase the construction costs as the design and labor costs will increase.
The material costs vary with the type of warehouse and storage. The materials for a cold storage warehouse will cost between $150 to $170 per square foot. In contrast, the materials for constructing an average warehouse will be between $50-$65 per square foot.
The material costs also go up depending on the height and quality of construction you need. If you build a high warehouse, the material costs will substantially increase due to larger loads of lower floors.
How to limit costs
A well-functioning warehouse can be very expensive to build and maintain, especially if improper practices are followed. Below are things you can do to minimize costs in a warehouse.
Use Natural Light
When we use natural light, we reduce the amount of energy spent on electricity bills. Besides reducing the power costs of a warehouse, natural light also boosts employee performance improving work efficiency.
Climate and Environmental Control
To lower costs, a warehouse should learn to control room conditions such as temperature and humidity. This ensures that the items are not damaged.
Changing the thermostat's placement, installing humidifiers, and using warehouse insulation on the ceiling, windows, walls, and doors will ensure that the interior is not affected by the external climate and environment.
Add Voice-Enabling Technology
Warehousing companies are now using voice-enabling technology to facilitate inventory control and reduce warehousing costs. Protecting the inventory helps prevent misplacing of goods through damage or theft, optimizing the Return on investment (ROI).
Do Cross Docking
This is done by eliminating intermediaries and interacting with the clients directly. It saves production management time, reducing costs.
To limit costs have regular pest control inspections to prevent pests like rodents from causing great havoc to your warehouse and the stored goods.
Determining The Size and Need Of a Warehouse
To determine the size and need of a warehouse, you need to know;
The material you choose for your warehouse will determine the size and functions you want it to do, like storage, chemical processing, and refrigeration.
You can determine the size and need of a warehouse by acquiring the volume of the goods being stored. The volume of a stored space is calculated by multiplying the length, width, and height (L*W*H)
The type of stored goods you keep in your warehouse will determine their size and need. One should know what stored goods require extra care. An inventory of your perishable and imperishable goods should be included.
Although a bigger warehouse is more expensive, it has more storage space and needs. This flexibility helps in case of an emergency where there is a sudden surplus or decrease of the stored material in the warehouse.
The higher the distribution rate, the larger the space needed for the stored goods. Warehouses with lower distribution needs are smaller and have fewer needs.
The Stages of Building a Warehouse
Building an efficient warehouse is quite an endeavor. Before constructing a warehouse, you need to know the construction procedure to make your project a success. The construction of an efficient warehouse follows a four-stage process, as discussed below.
A good client should be knowledgeable and discerning about the type of project they need. This is also known as the inception stage. The project team makes the most critical decisions during the inception stage, and the client's input is vital. Their decisions during the inception stage are not casual, affecting the effectiveness and overall project cost. During this stage, the team does careful feasibility studies to build the warehouse within the best budget.
Suppose the client has not settled down on a location. In that case, this might be the perfect time for zoning and selecting suitable sites for constructing the proposed building.
In any construction, a wide range of stakeholders are consulted, and therefore, a project team should be formed as early as possible. The project team includes a structural engineer, architect, client representative, and contractor. The contractor is selected through a competitive bidding process.
The next stage in construction is the pre-construction stage. Pre-construction is the most critical building stage. After the appointment of consultants and the contractor, design starts during the pre-construction stage. The project team develops a professional design that meets the client's needs and adheres to the relevant building codes. The design team conducts design in four stages. These are the preliminary, schematic, detailed, and final construction designs.
Proposals are prepared and cost during preliminary design, and an acceptable scheme is adopted.
After the preliminary design, the design team develops a schematic design in more detail, enabling the client to approve spatial arrangements, materials, and appearance. They should keep the building layout and construction method the same during this stage.
The following is the detailed design where all the construction details are reviewed and the cost estimate refined.
After the preliminary design, the cost consultant prepares the project's cost estimate. As the design evolves, this estimate is updated. The general contractor can renegotiate the contract terms during the pre-construction stage.
During the pre-construction stage, the project team also embarks on a more detailed feasibility study as they already have the cost estimates for construction. The feasibility studies should establish the following factors:
The type of warehouse and available alternatives
- Cost savings on either prefabrication or new construction.
- Potential incentives: There are many potential incentives often overlooked during construction. These include project financing, employee training, tax reductions, land donations, and operation cost reductions.
- Recruitment of staff and training implications: This should be done to determine the wages and budget necessary for training programs.
- Regulatory requirements: Before starting construction, it is necessary to assess the potential sites and review federal, regional, and local requirements and zoning restrictions, as these can affect the viability of a project. In some instances, areas with heavy traffic, air, or noise pollution may prompt an environmental impact assessment to determine their implications on a project.
- Cost outline with an assessment of both operational and maintenance costs.
- Work plan for project completion.
After setting out the roadmap in the pre-construction stage, the next step is procurement. Here the project team obtains the equipment and necessary materials for construction. The complexity depends on the size of the project, the availability of resources, and the expected project commencement date. Many construction companies are equipped with in-house construction teams that make procurement easy. It is also a chance for cost savings by the contractor as it increases the profit margins.
The construction stage is what most people relate to due to its visibility. The construction stage is when the actual groundbreaking occurs. However, the bulk of the work is accomplished during the pre-construction stage.
The planning pays off during this stage. The project team holds a pre-construction meeting. This meeting ensures everyone in the project is on the same page. It irons out issues such as accessing the job site, quality control, storage of materials, and working hours. The working hours are always dependent on the role played by the worker. If good planning rolls out during the construction stage, it can lead to severe cost overruns and delays. Once the meeting is over, work can commence. Usually, contractors avoid pitfalls during the construction stage by employing software solutions.
The second order of business is earthwork and foundations. Soil is added or removed from an area to create a level area for trucks transporting material to the site. Concrete is then poured into the area excavated for the foundation.The next step is building a framework on top of the foundation. This framework typically consists of heavy metal rafters and beams. A lighter skeleton is made over the heavy framework to contain the windows and doors. Metal sheets are then added to the framework for roofing. A layer of insulation is then added, and systems such as heating and air units are. All other units, such as offices, are then made operational. Pathways are marked, and special features are added. With this, the warehouse is ready to move to post-construction.
During the post-construction stage, all the work is complete, and the project is ready for handover. However, there are a few processes that need completion before the final handover of the warehouse. The post-construction process is subdivided into three stages. These are:
- Warehouse commissioning
- Owner occupancy
- Project closeout
Here, the project manager headed the project manager inspects to ensure everything was accurately done. These inspections are easy to pass since many inspections correct the defects that crop up throughout a project's lifetime. During this inspection, the project manager prepares a snag list. This list notes problems, such as forgotten project aspects, material and design issues, and poor craftsmanship.
After checking everything, the project team trains the client on proper usage and maintenance of the warehouse. This considerably improves the lifetime of the warehouse.
After the training is complete, the owner takes occupancy of the building. The warehouse warranty is active during this stage, and the owner has enough time to assess the systems and equipment installed.
Project closeout is the last stage of construction. The project team reviews the contract and ensures any legal burdens are taken care of. This would be a good time for the builders to perform a post-project review and identify things they need to improve on in upcoming projects.
The timescale of building a Warehouse
The time needed to build a warehouse is dependent on several factors. However, it is common knowledge that this time has significantly reduced over the past ten years. According to World Bank data, the time necessary to build a warehouse ranges from 86 days in the United Kingdom to 213 days in France. Making a warehouse in the United States takes an average of 165 days. As building time declines, building costs increase due to the increased complexity of a building.
The building time factors are the type of warehouse, location of the site, energy-related costs, and materials.
Climate and Environmental Control
Climate and environmental control are adjusting and installing features to help regulate its atmospheric room conditions. Climate and environmental control are important as it helps avoid any environmental disparities that may damage or affect the quality of stored goods.
In a warehouse, weather unpredictability should be avoided to keep conditions for stored goods favorable at all times. The required temperature range for a warehouse is between 35-45 degrees Fahrenheit.
To control temperature variations in a warehouse, you can; install air-cooling systems, add microprocessors to check and balance temperatures, use refrigeration systems, and insulate your warehouse to control your temperatures throughout the seasons.
Humidity is another weather component you should control to avoid the formation of mildew that can destroy your stored goods.
You can control humidity levels by using humidifiers and dehumidifiers that help maintain suitable conditions for stored goods.
Control the airflow by planning how you will arrange your warehouse area to be evenly squeezed. Ensure that all door openings are sealed with weather strips to help with insect control.
By now, you are ready to get your warehouse project rolling. Many factors influence the costs of warehouses, but the common factor is the ever-increasing demand for industrial space. Other factors affecting the cost include the location and size of your warehouse.
There are many dimensions and design types that you can consider depending on your intended use and budget. The inventory methods you apply will also depend on the kind of warehouse you settle for. The type of warehouse you choose also influences future service costs. Always consult a cost expert before starting your project to get the best possible quotations.
Finally, consider time lag considerations when constructing your warehouse. These factors affect plans in your organization and keep adding to the workforce and costs. The implications can also affect the quality of service delivery and the supply chain.