Investment in a warehouse is considered to be a very safe investment and involves far less maintenance as compared to other types of residential or commercial properties. With GDP of the country growing fast and hectic activity being recorded in the manufacturing sector of the country, the logistics and warehousing industry is witnessing remarkable growth and return on investment for the warehousing industry has been very high lately.
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Industry experts estimate that the size of the warehousing industry is expected to reach Rs 968 billion by 2024, growing at an annual rate of 9.5 percent between now and 2024. This growth will also be on account of growing international trade and emergence of organised retail in the country. If you are looking to invest in a commercial property, warehousing can be a very good option. However, there are a few things to take care of if you are planning to build a warehouse for rental purpose. These are:
1 Multiple Clients: Dont just focus on getting one huge client for the entire space in your warehouse. Try to secure several clients to spread your rental income over many of them so that there are fewer risks associated with your rental income. Try to have different facilities and arrangements in different parts of your warehouse in order to cater to storage needs of different clients. For example: there will be different requirement for storage of food stuff, medicines, chemicals, computer peripherals etc. This way you can entice different kinds of tenants for your warehouse.
2 Long Term Lease: The lease term for warehouses is usually 3-5 years. In certain cases, it is also 10 years. Try to lock your tenants in long term leases. The longer the better for you. Short term lease are not considered good for warehousing operations, unlike residential properties. This way you will be ensured of your rental income for a longer time and there will be less headache in finding a new tenant every now and then. Even the marketing expenses in finding new tenants frequently will be higher which you can save by singing long term leases.
3 Development Of The Warehouse: Do not develop your warehouse until your tenants enter into a respectable lease with you. If you start developing the warehouse in a particular fashion that suits one of the prospective tenants and the tenant has not entered into a lease agreement with you and changes his/her mind of renting space in your warehouse then you will be left with very few choices as far as that much space is concerned.
4 Approval Of Design: Let the tenant approve your warehouse design after they sign the lease agreement. If they suggest changes in the design, be ready to incorporate them. This way they will become more of a partner than a tenant which i fruitful from the purpose of conducting business with them. At the end of the lease period, the portion that a particular tenant has been renting can be sold to him/her also.
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