The Storage Dilemma
If you're a small business owner in San Diego with multiple locations, you've likely found yourself wondering how best to handle your inventory storage. Should you lease a commercial warehouse or use on-demand warehousing (pay-as-you-go storage)?
Both options have pros and cons. A commercial warehouse gives you dedicated space, but the lease cost involves more than just the quoted rent. On-demand warehousing offers flexibility by charging pay-per-pallet storage fees with no long-term commitments.
In this post, we'll compare the hidden costs of a traditional warehouse lease (NNN expenses, utilities, insurance, long-term contracts) with the flexibility of on-demand pallet storage. By the end, you should have a clearer idea which model fits your business based on size, volume, seasonality, and flexibility needs.
The Hidden Costs of a Commercial Warehouse Lease
Leasing a warehouse means taking on a fixed monthly rent plus a variety of extra expenses. It's important to go in with eyes open about these "hidden" costs:
Base Rent (San Diego Rates)
Commercial industrial space in San Diego isn't cheap. As of 2024-2025, the average asking lease rate is around $1.40–$1.50 per square foot per month. So a 5,000 sq. ft. warehouse might have a base rent of roughly $7,500/month. Keep in mind, this base rent is usually quoted on a triple net (NNN) basis, meaning not including other expenses.
NNN Expenses (Taxes, Insurance, Maintenance)
NNN stands for Net-Net-Net, meaning the tenant pays their share of the property tax, building insurance, and common area maintenance. These can add a significant chunk on top of base rent. For San Diego industrial listings, NNN rates typically run ~$0.20–$0.30 per sq. ft. per month. That's an extra $1,000–$1,500 on a 5,000 sq. ft. space.
Utilities
In a warehouse lease, you pay your own utilities: electricity for lighting, HVAC, water, etc. Estimate $300–$800/month depending on usage. This is separate from rent and NNN.
Insurance
You'll need general liability insurance and contents insurance for your products. Budget $150–$300/month for a small business policy. You assume all risk for your inventory.
Long-Term Commitments: 3–5 Years
Commercial warehouse leases typically require a 3 to 5 year minimum commitment. That long-term lease is a double-edged sword. It gives you stable space, but it also locks you in even if your needs change. If your business downsizes or you no longer need the space, breaking a lease can be costly.
Equipment & Staffing Costs
Don't forget the cost of setting up and running your own warehouse:
- Forklifts and pallet jacks: $25,000+ for a used forklift
- Shelving/racking systems: $50–$80 per sq. ft. to install
- Warehouse staff or diverting your employees from revenue-generating work
- Security systems, safety training, and ongoing maintenance
The Bottom Line: Leasing a warehouse is a fixed overhead commitment. You have more control over the space, but you shoulder all the costs and responsibilities. Many of these costs (rent for unused space, utility bills, repairs) are "hidden" in the sense that they're easy to underestimate when budgeting.
The Flexibility of On-Demand Warehousing
On-demand warehousing is a more flexible alternative, especially attractive for small and growing businesses. Instead of signing a building lease, you partner with a warehouse provider and pay for only the space and services you need, typically on a per-pallet, per-month basis.
Pay for What You Use
With on-demand storage, you're charged by the pallet stored each month. If you have 20 pallets one month and 50 the next, you pay for 20 the first month and 50 the next. No wasted expense on empty space.
No Long-Term Lock-In
Most on-demand warehousing services operate on month-to-month terms. Need storage for only 3 months for a seasonal peak? Not a problem. You avoid the "what if we don't use all this space?" dilemma.
Minimal Overhead
The warehouse operator handles the facility, equipment, and staff. You don't need to purchase forklifts, racking, or hire warehouse employees. You're plugging into existing infrastructure.
Built-in Services
Many on-demand warehouses offer receiving services, inventory tracking via online portal, and delivery to your locations. It's like having a mini distribution center without the headache.
Reduced Liability
The warehousing company typically carries insurance to protect your goods and has security measures in place: 24/7 surveillance, alarm systems, gated access, and trained staff. Your total cost is condensed into one line item, making bookkeeping simpler.
Cost Comparison: Lease vs. On-Demand
Let's do a side-by-side comparison. Imagine your business needs storage for around 100 pallets of product. Option A is to lease your own small warehouse (around 5,000 sq. ft.). Option B is to use Juujbox on-demand warehousing.
| Cost Factor | Warehouse Lease (~5,000 sq ft) | Juujbox On-Demand (100 Pallets) |
|---|---|---|
| Base Rent | $7,500/mo | Included |
| NNN Charges | ~$1,250/mo | Included |
| Utilities | ~$500/mo | Included |
| Insurance | ~$200/mo | Included |
| Staff & Equipment | Your responsibility | Included |
| Receiving & Put-Away | Your responsibility | Included |
| Monthly Storage Cost | ~$9,450+ | $5,500 (100 × $55) |
| Delivery to Locations | Your truck + driver | $75/route (flat rate) |
| Commitment | 3–5 year lease | Month-to-month |
At 100 pallets, you save approximately
$3,950/month
with on-demand warehousing vs. leasing
What About Smaller Scale? (20 Pallets)
The math gets even more compelling for smaller businesses. If you only have 20 pallets:
Lease (5,000 sq ft)
~$9,450/mo
You're still paying for the full warehouse, even though you're only using a fraction of the space. That's $472 per pallet.
Juujbox (20 Pallets)
$1,100/mo
You pay for exactly what you use. That's $55 per pallet, all-inclusive.
Key Insight: The lease scenario's costs are mostly fixed. Even if you only had 20 pallets, you'd still pay the same rent, NNN, and utilities. With on-demand storage, your costs scale with your actual needs. This is the big advantage for businesses with seasonal fluctuations or uncertain growth.
Which Model is Right for Your Business?
Every business is unique, so the choice comes down to your specific situation. Here are some guidelines:
Consider a traditional lease if...
- Your storage volume is large and stable. If you consistently need 200+ pallets and foresee that continuing, having your own warehouse might pencil out.
- You require full control over the space. Businesses needing specialized machinery, custom layouts, or refrigeration may prefer leasing.
- You have staff and infrastructure ready. You already have the team and equipment to run a warehouse efficiently.
Consider on-demand warehousing if...
- Your storage needs fluctuate or are seasonal. If you have busy seasons and slow periods, on-demand is ideal. You won't pay for empty space in the off-season.
- You're a small or growing business. On-demand storage is a low-risk way to get warehouse capacity. Start with a few pallets and expand as you grow.
- You want to minimize overhead. Outsourcing warehousing means outsourcing the headaches. Focus on your core business, not managing warehouse operations.
- You have 2–10 locations to restock. With Juujbox's $75 flat-rate delivery routes, restocking becomes simple and predictable.
Frequently Asked Questions
What does "NNN" mean in a warehouse lease?
"NNN" stands for triple net, which refers to the three major expenses that a tenant pays on top of base rent: property taxes, property insurance, and common area maintenance (CAM). In San Diego, NNN charges typically add $0.20–$0.30 per square foot per month to your base rent. Always ask what the current NNN expenses are for any space you're considering.
How long are typical warehouse leases?
Most commercial warehouse leases in San Diego require 3 to 5 year commitments. Short-term leases are rare. If you only need storage for a few months or a year, or simply don't want that long-term commitment, on-demand warehousing with month-to-month terms is much more suitable.
How do on-demand warehousing fees work?
On-demand fees are usage-based. Juujbox charges $55 per pallet per month, which includes receiving, forklift labor, inventory tracking, and climate-controlled storage. Delivery to your San Diego locations is $75 per route (flat rate, regardless of pallet count on that route). No hidden fees for receiving or outbound handling.
Is my inventory safe and insured?
Reputable on-demand warehousing providers maintain security systems (24/7 surveillance, alarm systems, controlled access) and carry insurance to protect stored goods. Juujbox's facility includes climate control, fire suppression, and professional inventory management. Your goods are covered under our warehouse insurance policy.
When should I switch from on-demand to leasing my own warehouse?
Consider leasing when you consistently need 200+ pallets, have stable year-round inventory levels, and have the staff to manage warehouse operations. For most San Diego businesses with 5–100 pallets, on-demand warehousing remains more cost-effective and flexible. The key is utilization: a leased warehouse is only cost-efficient if you keep it largely filled.
What's included in Juujbox's pallet storage pricing?
Juujbox's $55/pallet/month rate is all-inclusive: receiving and put-away, forklift labor, inventory tracking via online portal, climate-controlled storage, and dedicated account management. Delivery to your San Diego locations is $75 per route. No hidden fees for receiving, handling, or outbound.
Ready to Simplify Your Storage?
Skip the lease negotiations, NNN surprises, and equipment purchases. Juujbox offers flexible pallet storage starting at $55/month with $75 flat-rate delivery to your San Diego locations.
