How Much Industrial Warehouse Space Do You Need?

If you know you need a warehouse or are outgrowing your current space and need something bigger, the next logical question is: how big? Estimating square footage or space needs can seem intimidating if you haven’t done it before. However, simply guessing at your needs is a sure way to find yourself in the wrong facility that does not meet your business needs.

Accurately assessing your warehouse space needs helps ensure you don’t end up overpaying for too much space or stuck with something inadequate, and there are several reliable methods for making this assessment. This article will cover two techniques for estimating your warehouse space needs. We’ll also discuss how to factor in non-warehousing space needs, such as office or assembly space, so you can be sure of exactly what you’re looking for in your next warehouse.

Method One: Calculating Your Warehouse Space Needs in Ft²

This first method is more accurate if clear height is not being fully utilized, or if you do not plan to rack product.

Step One

First, you need to estimate the square footage you’ll need to accommodate your maximum expected inventory in storage.

If your inventory is palletized, you may be able to sub in the standard loaded pallet dimensions of 4’ L x 3.5’ W x 4’ H. However, if your goods are unboxed, oversized, irregularly shaped, and/or un-stackable, you’ll need to measure their average dimensions to make further calculations.

Step Two

Next, you need to define these three variables:

• X: the # of pallets/goods you will typically have in storage.

• Y: the maximum stacking height of your pallets/goods.

• Z: your optimal utilization percentage rate.

The value you use for Z depends on the goods you need to store. Higher stock variety and higher turnover rates require lower utilization percentages. A typical guide to utilization rates goes something like this:

• 40% for non-standard, difficult-to-stack, or otherwise out-of-gauge (OOG) goods.

• 50% for stackable goods with expiration dates, like food or cosmetics, and high turnover rates.

• 60% for up to 100 non-perishable stock-keeping units (SKUs) with moderate to high turnover rates.

• 70% for less than 100 non-perishable SKUs with low to moderate turnover rates.

• 80% for less than 10 non-perishable SKUs that stack easily and have low turnover rates.

Note: None of the above rates are 100%. This is because 100% utilization would leave no room for aisles, equipment, packing space, etc. You’ll always need some open space for people and equipment to access what you have stored.

Step Three 

Calculate your square footage needs using these equations:

• X pallets ÷ Y stacking height = A stacks

• Pallet length x Pallet width = B ft² per pallet stack

• A x B = C ft² per stack

• C ÷ Z utilization rate = Total ft² of required warehouse space

Let’s illustrate with an example. Say your company stores 1000 standard pallets that can be stacked two high, and your optimal utilization rate is 60%. Your calculation would go:

• 1000 pallets ÷ 2 stacking height = 500 stacks

• 4’ L x 3.5’  W = 14 ft2 per pallet stack

• 500 stacks x 14 ft² = 7000 ft²

• 7000 ft²  ÷ 60% = 11,667 ft² of required warehouse space

Note: Regulations can limit how high you stack. This could be related to the type of product you are storing, weight, and/or the fire suppression system present in the facility.  In short, make sure you understand your product and what is allowed in a given facility before getting too far down the road.

Method Two: Calculating Your Warehouse Space Needs in Ft³

This method is more accurate if you plan to use racking and a forklift in your warehouse.

Step One

First, measure the square footage of the warehouse you’re considering, minus non-storage facilities such as offices and bathrooms. Then, measure the clear height of the internal ceiling. Multiply those two measurements together to get a rough number for total cubic feet.

Step Two 

Next, estimate the volume of your goods to be stored by multiplying the average length, width, and height of each pallet/item to get its volume in ft³. Then multiply that ft³ number by the total number of pallets/items to be stored.

Step Three

Finally, divide the final number you got in Step Two by the final number you got in Step One to get your utilization rate percentage. If that utilization rate percentage falls between 22% and 27%, then that warehouse is a good fit for your business.

Once more, let’s use an example to see these calculations in action. Say your company is looking at a warehouse with 10,000 ft² of usable space and a clear height of 24 feet. On average, you estimate you’ll need to store 1000 pallets measuring 3.5’ x 4’ x 4’, or 56 ft³. To determine if this warehouse has the right amount of space for your operation, you would calculate:

• 10,000 ft² x 24’ clear height = 240,000 ft³

• 56 ft³ x 1000 pallets = 56,000 ft³

• 56,000 ÷ 240,000 = 23.33% utilization rate

Since 23.33% falls within the general guidelines of 22% to 27%, this space can be considered an appropriate size for your business needs.

How to Factor in Equipment and Packing Space Needs

If you plan to use your warehouse space for more than just storage, you’ll also need to consider your space needs for those additional operations. To do this, first determine the square footage you’ll need for all stationary equipment and work areas by multiplying each element’s length by its width. These elements may include:

• Workstations

• Conveyors

• Picking and packing areas

Next, add all additional elements together to come up with their total ft² amount. Finally, you’ll either add that amount to the final ft² number you calculated in Method One, or subtract it from the initial warehouse square footage in Step One of Method Two.

Office and Employee Space

Finally, if you want offices and employee facilities on-site at your warehouse, you should also factor in those space needs to your search. Different space estimates will apply, depending on the type of employee facilities you want. 

• If you will have employee offices on site:

• Estimate between 250 and 500 ft² per employee if staff will primarily use private offices.

• Estimate between 150 to 250 ft² per employee for cubicles or a mixed floorplan of open space and private offices.

• Estimate between 80 and 150 ft² per employee for high-density or co-working floor plans.

• If you want meeting rooms on site, estimate between 30 and 40 ft² per attendee.

• For restrooms, estimate at least one toilet per 20 employees.

• For breakroom/kitchen space, estimate a minimum of 75 ft² plus 25 ft² per seated person. 

Make Sure to Plan for Projected Growth.

When making your calculations, you need to consider not just your existing space needs, but also what you’re likely to need in the near future. Acquiring just enough space to suit your immediate storage needs may not be enough if your business increases significantly over the next five years, or if it requires a lot more storage space during peak season. 

To anticipate any changes in space requirements due to business growth, you need to consider multiple factors such as: 

• year-over-year revenue growth

• forecasted demand 

• sales patterns

By balancing multiple growth predictors against one another, you’ll get the most realistic picture possible of how your storage needs are likely to change in the coming years.

As for businesses with seasonal changes, the main concern is whether your warehouse will have enough space to accommodate peak-season storage demands. The simplest solution is to secure a warehouse with enough space to accommodate your peak season. However, this sometimes results in having a prohibitively expensive amount of underutilized space during the remainder of the year.

In such cases, you can look into third-party logistics (3PL) companies that can handle the overflow during peak season. If the cost of hiring such a company during peak season is less than the annual cost of the additional storage space, then hiring a 3PL is the smarter business decision.

Find the Right Warehouse with Modern CRE

For expert assistance estimating your warehouse space needs, you’ll find no better firm than Modern CRE. We have decades of experience identifying and securing the optimal warehouse space for our clients while providing personalized and highly attentive service. Get in touch to discover what Modern CRE can do for your business’ warehouse needs, today.