Leasing a warehouse involves a significant commitment. The warehouse is an integral hub of the company's supply chain; its location and size often influence its business model and operational efficiency.
When you think of renting a warehouse in the UAE, the first thought would be a lease contract that stretches to a year (or more!)
But what if there are options for renting a space for shorter time frames, like a month or, even better, for a few weeks? And what if we tell you it is possible to get your storage space ready for storage within a week?
Most companies lease warehouses on yearly rental terms. New warehousing options, such as flexible and on-demand warehouses, come under monthly rentals.
Let's delve deeper into yearly vs monthly rentals!
Annual warehouse rentals
Yearly warehouse rentals involve a long-term commitment of a minimum of one year. The landlord provides a dedicated warehouse space for a long-term lease, which offers stability and security for your business.
You can customize the warehouse and invest in state-of-the-art equipment without worrying about moving it at short notice.
Choosing a yearly rental can also save you money. Landlords often provide discounts or incentives for longer lease terms, and you can avoid the hassle of finding new space and signing new contracts every few months.
Yearly rentals are ideal for businesses with consistent operations and predictable demand.
If scalability is not a concern and your supply chain is reliable, paying annual rent can lead to potential cost savings and less hassle with lease renewals.
The disadvantages of yearly warehouse rentals
Annual rentals tie up the business to the warehouse space for the long term. The warehouse cannot evolve with your requirements. If your business experiences significant changes or growth, you may remain stuck with a space that no longer suits your needs.
An annual lease contract has many formalities, and it can take up to a month to finally move your goods into the warehouse.
Since the landlord owns the property, you'll need to ask for permission for any modifications or alterations, which may or may not be approved.
If the landlord chooses to sell the property, you may have to look for alternate options. Suppose you plan to move your business to a new location or explore new markets. In that case, the current warehouse may not be the best fit. But, regardless of whether you use the space or not, you will still need to pay the rent for the entire contract period.
With your expenses already tied up, taking additional space elsewhere might not be feasible as it can drain your finances.
Renting a warehouse also has the disadvantage of rent fluctuations since landlords may increase rent annually.
If your business outgrows the warehouse, expanding the space to accommodate more goods may be challenging, and finding additional space elsewhere can be expensive.
In some cases, improvements made by tenants may become the property of the landlord, which means your investments in the warehouse become additional expenses which benefit the landlord rather than you.
How is monthly warehouse rentals different?
Monthly rentals involve short-term contracts, with the business committed to the space only for a month. You can renew or terminate the lease every month.
Setups like Flexible Warehousing have contracts that allow agreements for less than a month. And the best part is that you get access to storage space within a week's time!
Most monthly rental providers and flexible warehouses offer standard form contracts, lessening the burden further. Also, in today's digital age, e-contracts and paperless communications reduce the administration burden further.
Read More: What is On-Demand Warehousing?
Monthly warehouse rentals are growing popular due to their flexibility and scalability. Businesses can easily take up additional space for a month or two to meet seasonal rush or to set up a warehouse near a sale site.
You can easily relocate as per your needs without being tied to a long-term contract. Such flexibility becomes especially invaluable during times of crisis, such as a flood, a pandemic, or some other disruptions. E-contracts and paperless communication make administration easier in today's digital age. If you opt for flexible warehousing, you can access storage space within a week.
Even otherwise, businesses become agile by setting up a warehouse near e-commerce fulfilment centres to meet customer demands of same or next-day delivery while retaining other warehouses for specific advantages enjoyed at those locations.
Seasonal peaks and extra demand?
You can take up temporary storage services for those particular months. Once you have fulfilled your requirements, you can easily move out of the space.
Most flexible warehouses and monthly rental providers offer value-added services related to packing, dispatching, and so on. You can leverage such services on a pay-as-you-use basis to reduce overheads and capital expenses.
You can also use the help of professionals and IT systems associated with short-term warehouses.
The only disadvantage of monthly warehouse rentals is that they may cost more than yearly leases on an absolute square foot basis. However, the business may still save money as there is no contract binding it to the warehouse for a fixed period. You are also free, without any liabilities, to leave the warehouse anytime you wish to. It is easier to manage cash flows since you do not have to pay the entire annual rent in one go.
With monthly rentals offering the flexibility to scale up and down spaces quickly, businesses can shed unneeded spaces without having to pay for them for the year.
In today's dynamic world, where there is a lot of uncertainty when inventory levels fluctuate, it is also the best option if your business or inventory is seasonal. Using monthly rental warehouses, you can make your supply chain more resilient and move fast to seize opportunities.
There is absolutely no reason to tie up significant amounts for storage when you can get the same features minus the liabilities through flexible warehouses. Suppose you anticipate rapid growth or changes soon. In that case, a monthly rental gives you more agility to adapt to your business requirements.
Monthly rentals offer greater flexibility, are more cost-effective, and provide flexible options for businesses operating in today's uncertain business environment. Regardless of the rental choice, review the lease terms thoroughly and tie up any loose ends to pre-empty disputes down the line.
Interested to know more about flexible warehousing options in the UAE? Get in touch with our team.