Co-Warehousing, Is It Right For You?

What is Co-Warehousing?

Co-warehousing is a shared working facility used by multiple small businesses. It provides these small businesses with office space, warehouse space, networking opportunities, and logistics services to its members.

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Who Does Co-Warehousing Help?

Co-Warehousing can be beneficial for businesses of all sizes, they are mainly seen as a benefit to smaller businesses. However, during seasonal time periods like near big holidays you can see large companies use them in the past. Nowadays since the disruption in the supply chain from Covid and other external factors we have seen large businesses switch from just-in-time inventory storage into just-in-case inventory storage. This is where large retail businesses are now getting storage or storage containers for products that they usually sell and this became more prominent when Covid hit and most stores were out of stock on everything and the supply chain was struggling. They switched to this method to protect against another possible black swan event that could occur in the future because this used to only be used during seasonal times. 

Benefits of Co-Warehousing

What benefits come from Co-Warehousing? Well, co-warehousing allows for large retailers and small business owners to rent out a small unit or a couple of units at a warehouse for short or long periods of time. This is beneficial for both parties because it allows the businesses to not expend a ton of capital to purchase a whole warehouse for storage and allows for the business to use it for a couple of months at a time if needed or for a longer time period if the start-up/small business is doing better than expected. 

  • Allows for Short and Long-Term Leases
  • Makes it Possible for Small Businesses to operate more efficiently
  • Co-Warehousing owners can lease the spaces for a premium

As stated earlier Co-Warehousing allows business owners to rent out a space for the short or long-term. This is beneficial for parties renting because they are not tied down to a lease for a prolonged period of time. This is beneficial for the large companies using co-warehousing because most of the time they need overflow storage from a seasonal event like Christmas when they need extra inventory. They can rent out a unit at a co-warehousing property for a couple of months and be provided with the extra storage they need without having to lease out a large warehouse and spend more money than needed and be trapped in a lease for years to come. Co-Warehousing is particularly a benefit to small businesses because a small business is not able to provide enough capital to own an entire warehouse so by using co-warehousing the small business owner can expand their space or be able to decrease their space depending on how the business is doing.

For an owner of a co-warehousing property, you can see benefits as well because with shorter-term leases you are able to charge a premium for the space and a higher premium the shorter the lease. The owner can do this because if they kept the price fixed at a long term rate there wouldn’t be an incentive to sign into a long-term lease, whereas if you charge a premium for the short-term lease then you mitigate the risk of because with a short term lease you have a high chance that after the lease expires you will have to look for a new tenant for the space costing time and money that is why the owner is allowed to charge a premium for the space for shorter leases.

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Creating an Ecosystem by Co-Warehousing

Co-Warehousing offers a lot of benefits as stated earlier but one of the largest benefits for operating in a co-warehousing property is that it creates its own ecosystem. What does it mean to have its own ecosystem? A small business operating from a co-warehousing space can expect to be neighbors with a third party logistics company which will handle the logistics side of the business for the businesses in the building and allow the small business owner to focus more on the business than trying to get the product to the end user. Furthermore, since co-warehousing is similar to co-working there will be other businesses at the property that will prompt motivation. Furthermore, with other businesses being at the property small consulting firms will be a part of the tenancy and will provide consulting services to small businesses in need. By combining all of these businesses together at one co-warehousing space it will create its own small ecosystem where all the businesses can operate more efficiently by doing business with one another.

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