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How Much Does It Cost to Build a Distribution Center?

How Much Does It Cost to Build a Distribution Center?

Is your business making strides but now you’re starting to see bottlenecks and need to quickly scale your shipping and fulfillment processes to keep up with demand? In the United States, distribution is a design driver because of the increasingly wide range of products offered by companies and due to changes in the efficiency of retail logistics. Utilizing distribution centers not only helps ensure  product availability with minimal back orders, distribution centers also help keep product costs down.

A distribution center combines the capabilities of a traditional warehouse with that of a fulfillment center to provide a long-term storage solution that can be aligned with your delivery needs. Distribution centers allow you to store large amounts of inventory in locations that are often close enough to major markets to make shipping relatively easy and save you money. 

If you’re looking into opening a new distribution center, you’ll want to start by estimating the costs associated with a build. The cost of building a distribution center or warehouse depends on a variety of factors, such as the size of the warehouse, location, market conditions and type of warehouse. Since the needs of each project are different, there is no way to give a general estimate. However, we can start with some key considerations to get an idea of what it’s going to cost to build a distribution to meet your specific needs. 


Average Cost to Build a Warehouse

On the high end of the spectrum, giants like Amazon spend millions on the construction of a fulfillment center. But for most companies that are building a more standard facility, the cost of warehouse construction primarily depends on size. Depending on the style, design and accessories required, the total cost of building a warehouse can range from $35 to $100 per square foot. Other operational and miscellaneous costs include: 

  • Permit costs
  • Analysis and planning
  • Cost of materials 
  • Land cost
  • Design/architecture costs
  • Engineering costs
  • Costs associated with market conditions
  • Soft costs such as energy
  • Contractual costs and fees
  • Security system costs
  • Labor and construction costs
  • Equipment costs
  • Technology integration costs
  • Consulting costs
  • Project management costs
  • Other legal and taxes


Location and Logistics 

The cost of building a distribution center in the U.S. varies considerably from state to state. Costs are going to be higher than average in New York and California. Professional planning of distribution centers will always need to take into account location for logistics purposes. Inventory location is a critical component of a high-performing logistical operation and a centrally located distribution center near to vendors, distributors or production facilities leads to cost savings.  


How Much Storage Does Your Distribution Center Need?

One challenge in building a distribution center is determining how much warehouse storage room you’ll need, not only for now but also to accommodate future growth. This is one reason many businesses look to outsource either their warehouse overflow or their entire distribution process. Outsourcing warehousing and distribution eliminates the problem of not knowing how much storage will be needed since third-party providers typically have very large facilities that can meet most needs. 

Warehousing costs are most often expressed as a percentage of the total number of pallets stored for the month and the average cost per pallet per day. However, there are other less common forms of fees: collection and storage charges. Some companies are breaking with the standard of pallet storage and instead are charging a storage fee based on the cubic feet material used, which is better suited to the collection and containers. 


How About Online Estimator Tools?

Remember that when using an online estimation tool, many costs such as equipment and other various soft costs are not taken into account. For the most accurate estimate, contact experts who can take into consideration all factors and give you the most accurate estimate. Talking with an expert who understands all the elements of a quote helps ensure that the estimated total cost of constructing a commercial distribution center is as precise as possible. 

This expert can also consult with you to determine the style, size and features that make your building right for your needs. It's a great opportunity to get insights from someone who knows the industry and can guide you as you make your decision. 


Do You Need More Capabilities Such as Assembly and Fulfillment?

Third-party logistics providers (3PLs) specialize in providing a full range of value-added services including fulfillment, warehousing, kitting, assembly, packaging and just-in-time delivery. It’s important to consider which of these services you’ll ultimately need and whether you will be outsourcing or handling them in-house.  


An Alternative to Building a Distribution Center

The cost of building a warehouse or logistics center depends on a number of factors. Ultimately, a facility can end up costing a great deal of money and the process of having it designed and built can take up valuable time. If you’re looking to bypass the headache of doing it all yourself, you can always consider outsourcing your distribution needs entirely. 

As experts in distribution, NewStream Enterprises, LLC understands what it takes to organize, manage, operate and improve upon your logistical situation to bring about the most cost-effective solutions for the long-term growth of your company. 

And what’s more, you don’t have to wait for new construction to be completed. When you are ready to expand, we have the capability to seamlessly meet your needs today and accommodate your future growth. Given all the benefits of outsourcing warehousing and distribution, it’s a smart business move to find out how NewStream can serve you.

Tagged: Distribution

Oct 6, 2020 12:06:28 PM