How to Determine Your Warehouse Space Needs When Buying or Leasing a Warehouse

“How much warehouse space do I need?” This is one of the first questions you should ask if you’re looking to buy or lease a new warehouse. Too much space, and you have unnecessary expenses. Too little, and you won’t have room for growth.

There are a number of factors to consider when finding your optimal warehouse space, such as the products you store and how much space you’ll need for navigation. In addition, it’s important to realize that the total square footage of a building does not equal warehouse capacity.

In this blog post, we’ll dive into factors you should consider when deciding how much warehouse space you’ll need. Plus, we’ll show you some simple formulas for determining your warehouse capacity.

Whether you’re moving to a bigger building or you’re on the hunt for your first warehouse, understanding the proper space requirements for your needs is a vital step.

Why Finding Your Optimal Warehouse Space Matters

Finding the right warehouse can have a significant impact on your business. The size of your warehouse space might seem like it has little effect immediately. However, over time, having too little or too much warehouse storage space can inhibit business growth or cause unnecessary expenses.

When determining the appropriate amount of space, there are a number of factors to take into account. The size and nature of the products you store, the variety of items, the equipment you use, and how much square footage you need for other areas of the building (such as offices and break rooms) are all factors that should play into your warehouse space calculations.

It’s important not to skimp when calculating how much space you need. Without enough space, the company’s future growth could be stunted. Even worse, not having sufficient space for your current storage needs can lead to dangerous situations when navigating the warehouse, as well as cause backups during peak seasons.

At the same time, if you’re paying for valuable space that isn’t being used, you’re only taking on extra unnecessary costs. Every square foot adds on electrical, heating, and maintenance costs that compound over time.

For these reasons and more, finding the ideal amount of warehouse space for your needs is highly important for the future success of the business.

Factors to Consider When Determining Warehouse Space

The first step to finding an estimate of your warehouse space requirements is to consider the different areas of the building. Calculating how many square feet you’ll need for inventory may be the most important factor, but it’s not the only factor.

Here are some areas to consider:

Inventory

This is the space you’ll need for product storage. Figuring out how much inventory space you’ll need is largely determined by the total number of pallets you’ll need to store. But it’s also influenced largely by the size of the pallets, how stackable they are (and how much vertical space you have), and space utilization (how efficiently the space can be used).

Effectual inventory management can help to increase warehouse storage efficiency and maximize the use of the space.

Loading Areas

Loading areas are an important part of the warehouse layout and space requirements. While loading docks and navigation areas can’t be used for storing products, of course, they are an important factor to consider when calculating the total square footage needs of your warehouse.

Space for Navigating Equipment

Be sure to take into account how many square feet you’ll need for storing equipment. In addition, the equipment used in warehouse operations will also play a role in determining aisle size and how much floor space is needed for navigating through the warehouse.

Break Rooms

While they’re not part of the storage area, the size and number of break rooms needed for employees must be added to the total amount of square footage you should look for when choosing a building.

Office Space

Lastly, consider how much office space is necessary for the building. True warehouses generally don’t have a lot of employees working at once, nor do they need large office spaces. On the other hand, for flex spaces, calculating office space can be a significant factor.

Other Variables Regarding Warehouse Space

In addition to determining the amount of space you’ll need for regular operations, the total storage capacity of a warehouse can be influenced by other factors as well, such as:

Returns

Take into account how much space might be needed for holding returns at any given time, as well as return handling facilities.

Peak Seasons

A warehouse must be prepared to hold inventory during the busiest seasons of the year. When calculating the amount of available storage space needed, be sure to take into account the extra product that will have to be stored during peak seasons.

Out-of-Gauge Cargo

Out-of-gauge cargo (OOG) is inventory that’s too large to fit into standard shipping containers or pallets. Consider large or irregularly shaped items when calculating your warehouse space needs.

What is Warehouse Capacity?

Warehouse capacity is the amount of space that a warehouse has for storing products. This includes both horizontal and vertical space. It’s important to note that warehouse capacity is not the total square footage of the warehouse.

The working warehouse capacity of a building can also vary depending on the needs of the user. For example, some businesses store oversized or unusually-shaped products, which limits warehouse space utilization.

As another example, the nature of the business will determine what kind of tools and equipment are needed to handle products and navigate the available space. Larger equipment and awkwardly-sized products are both factors that influence warehouse utilization and can affect the overall capacity.

How to Determine Your Warehouse Capacity

If you’re considering moving from your current space to a new warehouse building, you’ll want to determine a reliable estimate of the current storage capacity of your warehouse. This will help you decide how much additional space you’ll need.

Remember, having too much space generates unneeded higher costs and can also lead to storing too much excess product.

So how do you determine your warehouse capacity? Here’s a simple formula:

• Total square footage of the building – non-storage square footage = warehouse capacity

If you have a 20,000 square foot building with 5,000 square feet taken up by break rooms, restrooms, loading docks, offices, and space for navigating equipment, your equation would look like this:

• 20,000 square feet – 5,000 square feet = 15,000 square feet of warehouse capacity

Once you know how much storage capacity you have in square feet, you can also determine how many cubic feet of usable space you have. You’ll need to know the clear height of the space in order to find this number.

Suppose your clear height is 20 feet. Now all you need to do is multiply the square footage of your storage space by the clear height (or maximum stacking height), like this:

• Square feet of storage capacity x clear height = cubic feet of warehouse capacity

In our example, the numbers would look like this:

• 15,000 square feet x 20 feet = 300,000 cubic feet of warehouse storage capacity

You can also use a warehouse space calculator to help you determine your warehouse storage capacity.

Warehouse Space Utilization

How much of a warehouse can you use? The amount of space you can utilize for storage depends on what you’re storing. The ratio of space you can use compared to the total storage space is referred to as warehouse utilization.

The nature of your business and the products you store can help to give you an idea how much of your building can be used for storage space. While 80% is a general recommendation, the reality is that many businesses will not be able to use such a large percentage of the building for inventory.

Here’s a guide to understanding about how much space you might be able to use for storage in your building.

• 40%-50%. If you store perishable goods, such as food, pharmaceuticals, florals, or cosmetics, you’ll need to manage expiration dates and rotating items. This requires leaving extra space for navigation and rotating inventory. In addition, warehouses that hold very heavy or unusually sized products may also be able to use only 50% or less of a building. These items generally require extra space for lifting, moving, and storing.
• 60%-70%. Companies that store dozens of products that are accessed many times per year can generally utilize around 60%-70% of a space while still leaving enough room for navigation and inventory management.
• 80%. Warehouses that only store a dozen or so items and/or only move inventory a few times per year can get the maximum usage out of a warehouse space.

As you search for a new warehouse building to buy or rent, start by finding the total square footage of the warehouse portion of the building (in other words, subtract offices, break rooms, loading docks, and other unusable space). Then, use this guide to determine what percentage of the space you might be able to use based on the nature of the business.

When you’re calculating your warehouse capacity, knowing how many pallets you need to store – and can store – is also incredibly helpful information. The standard pallet size is 48″ x 40″. Think through how many pallets you’ll need to store and whether they’re standard size to help you determine your spatial needs. In addition, it’s important to consider whether or not you can stack the pallets.

This warehouse space calculator will help you determine your capacity needs based on the size and number of pallets you’ll need to store.

How Much Warehouse Space Do I Need?

There’s no one-size-fits-all formula for finding out exactly how much warehouse space you need. Your warehouse storage requirements will depend on a number of factors, including the type of products you store, the space and equipment you’ll need for loading and maneuvering, how high you can stack and the warehouse’s clear height, peak seasons, space needed for non-storage purposes, and more.

Using the equations we discussed above or working with a warehouse space calculator can give you a general guide for finding out how much space you’ll need.

In addition, partnering with an experienced commercial real estate broker can give you access to a wealth of experience and knowledge when it comes to choosing the ideal warehouse space for your needs.

FAQs About Determining Your Warehouse Space Needs

Is warehouse capacity different from warehouse space?

Yes, they are different. Warehouse capacity refers to the specific amount of usable space available for storing products, while warehouse space is simply the overall square footage of the warehouse building.

It’s important to note that warehouse capacity involves both the horizontal and vertical storage capacity of a warehouse. 

How do you calculate warehouse capacity?

Calculate warehouse capacity using these two simple formulas:

Total square footage of the building – non-storage square footage = warehouse capacity

Then, to find out how many cubic square feet of usable space are in a warehouse, use this formula:

Square feet of storage capacity x clear height = cubic feet of warehouse capacity

What is warehouse utilization?

Warehouse utilization refers to the amount of space a company can utilize in a warehouse compared to the total storage space. It’s a measure of efficiency and varies based on the type of product being stored. 

Factors that affect warehouse utilization include the pallet sizes a company requires, the ability to stack pallets, size and shape of the products, total number of products, and expiration dates.

Warehouse utilization is typically expressed as a percentage. It can be found using this formula:

Amount of space currently being used / total available space x 100 = warehouse utilization

For example: 800 cubic square feet / 1000 cubic square foot warehouse x 100 = 80%

Is it better to have too much or too little warehouse space?

Too much space equals unnecessary costs, while too little can inhibit business growth. Looking at the trajectory of the company may be the best measure of which side you should lean on. 

For stable or growing companies, having too little space causes immediate problems—such as potential backups in selling and shipping, dangerous situations with warehouse navigation, and stunted growth.

What are the main costs of leasing a warehouse?

In addition to base rent, warehouse costs may include utilities, insurance, common area maintenance (CAM) fees, and security deposits. The costs associated with a warehouse lease depend partially on the type of lease agreement (net lease, gross lease, percentage lease, modified gross lease).

Partner With Regent CRE Today

Overwhelmed by the process of choosing the right warehouse space? We can help.

At Regent Commercial Real Estate, we’ve worked with hundreds of business owners all around the metro Charlotte area. Whether you’re buying or leasing, we’re here to walk you through every step of the process. From determining your spatial needs to providing expert negotiation to understanding complicated lease agreements, we’re here to take the arduous and confusing tasks involved in finding a property off your plate.

There’s much to consider when choosing a warehouse building. In addition to square footage requirements, you’ll need to delve into factors such as location, sprinkler and power requirements, security, zoning, parking, and more.

With nearly 1000 successful sales and lease transactions completed, we’re intimately familiar not only with the Charlotte landscape, but also with the many factors that go into choosing the ideal space to help a business grow and thrive.

If you’re ready to find your perfect warehouse space in the greater Charlotte, NC area, we’re happy to help! Contact us today to get started.