Warehouse
How to Choose the Location of Your Warehouse
- Written by Clare Dyckhoff
From product selection to marketing campaigns, there are plenty of decisions to make when you are a business owner. When it comes to renting or leasing a warehouse as your business develops, you might be wondering which location is best.
Choosing the right location for your warehouse in the U.S. is a crucial decision that can impact your business operations and overall success. But help is on the way, here are some key factors to consider when selecting a warehouse location.
Table of Contents
Why do you need to find the right warehouse location?
Proximity to customers
Rates, regulations and taxes
Proximity to transport options
Workforce availability and cost
Supply Chain Partners
Climate and Natural Disasters
Technology
Why do you need to find the right warehouse location?
Before you even think about how to set up your warehouse inventory, finding the location of your warehouse can help reduce shipping costs for your business, and delivery times for your customers.
Some things to consider when choosing the location of your warehouse are:
Proximity to customers
Rates, regulations and taxes
Proximity to transport links
Workforce availability and cost
Supply chain partners
Climate hazards
Technology
Proximity to Customers
Customers are unique by nature but there are similarities when it comes to their purchasing behavior.
Similar to how particular calendar dates bringing in more sales, you might have a consistent bulk of orders coming from a specific location. If this is the case, it is worth considering a warehouse close to your customer base.
Choosing a warehouse in a more central location can help reduce shipping costs and delivery times when it comes from picking, packing, to delivery.
Even if you have help with customer payment with providers such as Shopify Plus, if you have orders coming in from a variety of locations, it is worth checking the costs and delivery time from the warehouse to your most popular customer destinations, to get an idea of how it could work day to day.
Of course, if your business supplies to international markets and customers too - this will need to be factored in too.
Does the warehouse location provide reliable, cost-effective, and efficient shipping to those markets? Analyzing how the location provides access to your target markets (and potentially markets you are looking to expand to) is a good first step.
Rates, regulations and taxes
With any element in business operations, there are regulations and tax implications to be aware of.
When it comes to taxes - different states operate on different tax structures. For example, in Florida the state sales tax rate on rentals including warehouse space will be 4.5% from December 1st 2023.
It is crucial to assess the tax implications for your business in the different states you are considering location-wise. Perhaps you need more flexibility or clarity on property taxes, income taxes and sales taxes.
When it comes to rates and rents, the availability of warehouses is also a key factor. Different regions in the U.S. will charge different costs for land and warehouse space, some might offer it at a premium if there is a lot of demand and not enough offerings.
There will also be options to either lease or purchase a warehouse. This might not be viable for all businesses but if it is for yours, consider the pros and cons to both:
Pros for leasing
More to choose from - warehouse space to rent is often more readily available than for sale
Less decision making and maintenance - someone else will be responsible for this
Money you would have spent on a down payment can go towards your business instead
Cons for leasing
More out of your control - the lease owner might sell before you want to vacate
Rents could increase while you are operating
Payment for space but no equity or stake in the lease
Locked into agreements - you might need to expand in 2 months vs 12
Pros for purchasing
Fixed costs could help with monthly maintenance budgeting
More control over how you improve it and where the money is spent
If the value of the property increases, so can your business capital value
Cons for purchasing
Hefty up front costs might not be feasible for all businesses
Annual costs are likely to increase (insurance, taxes)
The maintenance and improvements are on you and your wallet, not somebody else’s
With any location and warehouse design, there will be benefits and areas for improvement - be sure to weigh up the potential costs with the potential gains to ensure it is the right decision for you and your business.
Finally, regulations…just as each state and zone will have different tax rules, the same applies for local regulations and zoning laws.
Be sure to look into any that might impact your operations. This is the time to dive into environmental safety compliance.
Further reading: How to build a warehouse for your growing business
Proximity to transport options
Just like using warehouse management software can help smoothen the process, warehouses themselves are also a key link in the U.S. supply chain.
Warehouse space is fought after and the demand for it is likely to only get greater. Because it is such a key component in both business operations and the customer journey, having good links to transport is essential.
Having access to railways, ports, airports, and major highways is crucial to efficiently cart goods from A to B. Being close to key avenues can also help reduce shipping costs and improve delivery times.
When it comes to utilities, the chosen warehouse location needs to have access to reliable and cost-effective means of water, electricity, and gas to name a few.
It should be structurally sound, safely managed and organized, and comfortable for employees working inside.
Currently, the top warehouse locations in the U.S. are*:
Southern California
New Jersey
Dallas, Texas
Houston, Texas
Illinois
Florida
Nevada
Georgia
Pennsylvania
Missouri
*Data from Warehousing and Fulfillment
Why are these areas booming? For Southern California, over 3.8million (2023 data) people live in LA, with millions of tourists visiting the area each year too.
So given the fact so many people come to the area, it is no wonder having a warehouse in the area is such a popular choice. With that being said, the labor costs and with space being super limited means most are in the surrounding areas vs in central LA.
But this is not the case for all top locations in the list above. For New Jersey, the appeal is more transport-link bound. Not only with highways and train lines but because it boasts one of the busiest ports in the North Eastern US.
Whilst we will not go into the ins and outs of each location, you can see the appeal varies depending on the location and priority - e.g. space, transport links, proximity to customers.
Which matters most to you? Perhaps it is a combination of the above.
Workforce availability and cost
Just like taxes vary and warehouse options differ, workforce availability and costs also change depending on the region.
If your proposed warehouse location has great transport links, excellent customer bases nearby, and is at a price you can afford great!
Next it is about finding the availability and cost of skilled and unskilled labor in the area. Losing an employee can cost thousands of dollars in time and retraining, so having a stable, skilled, and enthusiastic workforce is crucial for your business,as well as making sure you have enough staff to cover the jobs required.
Looking at the quality of life in the community for your employees is another factor when it comes to choosing a location to base in.
Assessing local job markets can also help provide insights to determine whether you will get the support and workforce you need to do the business justice.
Supply Chain Partners
Just as warehouse management and smooth processes are part of the supply chain, it is worth thinking about the proximity of warehouses to suppliers and required partners in the supply chain.
When your warehouse is close to key suppliers, just like being close to customers, it can help reduce lead times and improve overall efficiency from order to delivery of your products.
Climate and Natural Disasters
With so much out of our control in business and beyond, when looking at warehouse locations in the U.S. particularly, thinking about the worst case scenario is a necessary component.
With climate risks and natural disasters changing and occurring annually, have a serious think about the risk of these happening in the area.
Not only does it help you weigh up whether the location is more prone to natural disasters such as hurricanes, floods, or earthquakes, it is even more essential if your business is weather dependent or impacted.
Further reading: How Ecommerce Logistics Handle Seasonal Delays & Disasters
Technology
From ecommerce shipping software to automation tools for ecommerce sellers, technology has helped us access, enhance, and improve the efficiency of a range of areas in business and our daily lives.
Inventory management software can help with everything from stockouts to keeping inventory up-to-date, whilst tips on warehouse management software can help automate the more manual parts of the process.
Look out for any competitors in the area you are considering and when it comes to technology, ensure the chosen location provides reliable and high-speed internet and other important infrastructure that is essential for modern warehouse operations.
Further reading:
Whether it's having access to a variety of transport links, or being somewhere with better leasing options if you are looking to expand in the short term, carefully considering all the factors above can help you make an informed decision about the best location for your warehouse.
Similar to market research, insight digging, and thinking of funding options if you are looking to scale, it is beneficial to conduct a thorough study and not be afraid to lean on experts who can help you find the right logistical solution for your business.
All going well, if your business goes from strength to strength and expands over time, this will not be the only time you look for the best location to suit you.
And when you've got your warehouse sorted, Veeqo can help with your warehouse and inventory management to ensure your business stays as efficient as possible, to help you scale and grow to your full potential.
Sign-up today - Veeqo is free and being owned by Amazon means you'll get full A to Z protections when you ship through our software.
