Choosing the right warehouse location has a direct impact on your efficiency, costs, and customer service. Whether you plan to lease or buy, this is one of the most important decisions you’ll make for your operations, and it can shape your ability to compete for years.
A well-placed warehouse can reduce travel time, lower transportation costs, and help you deliver orders on time. That improves customer satisfaction and protects your margins. But finding the “right” location isn’t simple. You need to look at the full picture, not just the price per square foot.
In this guide, we’ll walk through seven key factors to consider when evaluating a warehouse site. You’ll learn how to compare rent and taxes, assess the local labor market, and review access to major transportation routes and hubs.
Start with one question: What job is this warehouse supposed to do?
Before you evaluate cities, you need clarity on the warehouse’s role. Different “jobs” lead to different best locations.
A warehouse might be primarily:
- a service center (fast delivery times, tight cutoffs)
- an inbound staging point (import/port heavy, container flow)
- cost center (lowest total landed cost)
- capacity release valve (overflow, peak buffer)
- value-added hub (kitting, light assembly, returns, refurb)
Write this down in plain terms. If you don’t, you’ll end up debating rent while your real constraint is labor, drayage, or delivery promise. Once you define the warehouse’s role, the next step is to compare every location using the seven criteria below.
1) Rent Rates & Taxes
Rental rates and local taxes are often the first factors companies compare when evaluating warehouse locations. While these costs are easy to quantify, they should never be reviewed in isolation.
The US warehouse rental rate is normally based on square feet (SF) per year or month, depending on the landlord. Average prices in the US can range from as low as $2.56 SF/Year and as high as $16.50 SF/Year. See the table below for the top 6 low & high-cost markets.
Data Source: Industrial Market Outlook 2017
Base rent can vary significantly by region, but total occupancy cost also includes property taxes, local assessments, insurance requirements, and annual rent escalations. State and municipal tax structures—such as inventory taxes, sales tax treatment, or business levies—can materially affect long-term operating costs.
According to publicly available state and local economic development agencies, tax incentives may be offered in certain regions. However, these incentives are often conditional, time-bound, or tied to employment thresholds. They should be validated carefully before being included in financial projections.
Key takeaway: A lower rent market is not always the lowest-cost market once taxes, fees, and long-term obligations are accounted for.
2) Workforce Availability, Labor Skills & Costs
Labor availability is one of the most common constraints in warehouse operations and should be evaluated early in the site selection process. This includes not only the size of the local labor pool but also:
- Competing employers within commuting distance
- Wage expectations and turnover risk
- Availability of skilled operators (forklift, automation, inventory control)
Public labor data published by the U.S. Bureau of Labor Statistics (BLS) is commonly used to understand employment trends, wage ranges, and workforce concentration within the warehousing and logistics sector. While this data provides a useful baseline, it does not account for localized competition or shift-specific challenges.
When evaluating workforce availability, consider supply and demand: Low workforce availability and high demand will drive salaries up (meaning operating costs will be higher). The opposite is also true. High levels of workforce availability and low demand will drive salaries down. While availability and skills matter, rising labor costs can quickly erase savings in rent or transportation if you don’t evaluate them early.
Skills are also critical, in addition to workforce availability and costs. A workforce skill gap will result in low customer service quality and reduced competitiveness and productivity.
The following chart demonstrates the impact of a qualified/trained workforce in the logistics industry.
So, when choosing a warehouse location, research the demographics and focus on educational attainment, population characteristics & income levels. A quick Google search for “[city or state] demographics” should gather the needed information. City and state government websites are also likely to provide this information.
Key takeaway: A viable labor market is defined by accessibility, competition, and skill alignment—not just headline wage rates.
3) Roads, Highways & Traffic Flow
Accessibility to roads and highways and local traffic density must also be considered, especially if trucking is the main mode of transportation.
Transportation costs are affected by some or all of these variables and can impact the company’s competitiveness or the warehousing facility’s attractiveness to customers. Consider the following points:
- Accessibility to highways & exit ramps
- Highway inter-connectivity
- Public transportation penetration
- Average traffic speed and traffic volume
- Traffic peak hours
- Road safety & conditions
- Proper road signs & signals
Factors such as congested highways, surface roads, and poor signaling systems will increase fuel consumption, accident rates, and wasted time.
4) Proximity to Airport, Railway Stations & Ports
For operations that rely on imports, exports, air freight, or intermodal transportation, proximity to major logistics hubs can significantly influence cost and reliability. Shorter distances to ports, rail ramps, or cargo airports can reduce drayage costs and improve transit visibility. However, congestion around these hubs can offset distance advantages. Connector road quality, appointment availability, and terminal dwell times all affect actual performance.
Public infrastructure data from transportation authorities is commonly used to evaluate intermodal access, but real-world performance should be validated through carrier input and historical transit times.
Key takeaway: Proximity matters, but functional access and congestion risk matter just as much.
5) Markets & Local Environment Factors
A warehouse location should support both current demand and future market coverage. Being close to key customer markets can reduce transit time, shipping costs, and service variability. This is especially important for businesses with tight delivery windows or high return volumes. At the same time, environmental and geographic risks must be considered.
Flood zones, severe weather patterns, and regional climate risks can affect insurance costs, operational continuity, and long-term asset value. Publicly available tools such as FEMA flood maps are commonly used to assess flood exposure, but they should be reviewed alongside insurance and engineering assessments.
Local zoning regulations, community attitudes toward industrial traffic, and planned infrastructure projects can also influence long-term suitability. A strategically located warehouse can shorten delivery times, reduce transportation variability, and improve overall service reliability.
Key takeaway: Market proximity should be evaluated alongside environmental and regulatory risk.
6) Building Availability & Utility Costs
Even in strong logistics markets, not every available building is operationally viable. A warehouse has to fit how you operate. Clear height, column spacing, dock layout, yard space, and room to expand all matter. If the building isn’t a good match, retrofits can add unexpected costs and limit day-to-day performance.
One other aspect: utilities. You will want to double-check the availability and cost of utilities. Some warehouses are more demanding or dependent on one utility than another. For example, refrigerated warehouses are more dependent on electricity and water.
But there is one utility that almost everyone ignores: the internet and communication services. Remember to check the availability of internet services, the speed and link type (Cable, T1, Fiber, etc.) available, and all associated costs. Also, remember that on occasion, the installation of internet services can take up to three months or more.
Key takeaway: Evaluating available warehouse space goes beyond square footage and should account for layout flexibility, dock access, and future expansion needs (not just square footage).
7) Scalability & Network Flexibility
A warehouse location should support growth without forcing frequent network redesigns. This includes the ability to:
- Expand square footage or add shifts
- Adjust service coverage as customer demand shifts
- Integrate with future distribution nodes
Locations that limit expansion or force early relocation introduce avoidable cost and disruption.
Key takeaway: The best location supports your next phase, not just your current footprint.
How to Compare Warehouse Locations
Once you’ve identified a short list of locations, the goal is to compare them using the same criteria—so the decision doesn’t turn into a debate driven by opinions or “gut feel.”
A practical approach is to score each site against the seven criteria in this guide:
- Rent Rates & Taxes
- Workforce Availability, Labor Skills & Costs
- Roads, Highways & Traffic Flow
- Proximity to Airports, Railway Stations & Ports
- Markets & Local Environmental Factors
- Building Availability & Utility Costs
- Scalability & Network Flexibility
Step 1: Assign weights that reflect your priorities
Not all criteria carry the same importance. For example, if you promise fast delivery, market coverage and road access may matter more than rent. If labor has been a bottleneck, workforce availability may deserve the highest weight.
Important: Write down the weights before scoring any site. This prevents the team from “adjusting” priorities to fit a preferred location.
Step 2: Score each location using a consistent scale
Use a simple 1–5 scale (1 = poor fit, 5 = strong fit). Keep the scoring grounded in documented inputs—like lease terms, labor data, transportation access, and facility specs. To keep the process credible, require one short written justification for every score. If you can’t support the justification with data or a verified assumption, flag it as a risk.
Step 3: Compare the totals—then pressure-test the top two
The total score helps you narrow down options, but the final step is to pressure-test the leading candidates using scenarios that reflect real warehouse conditions.
Two useful scenarios:
- Peak volume + tight labor conditions: Can this location still hit service levels when hiring is difficult and volumes surge?
- Network change or growth: What happens if your customer mix shifts, your order volume increases, or you add a new sales region?
This is where Criterion #7 (Scalability & Network Flexibility) becomes the tie-breaker. A location that looks great today but cannot scale—because of limited building availability, labor constraints, poor expansion options, or weak network positioning—can quickly become an expensive constraint.
Step 4: Make scalability a “yes/no gate,” not just a score
To avoid selecting a short-term win that becomes a long-term problem, treat scalability as a decision gate. If a site cannot reasonably support your expected growth, expansion, or network adjustments, it should not be a finalist—even if it scores well on cost.
Bottom line: This method keeps the comparison simple, aligned to the seven criteria, and focused on what matters most: choosing a location that works now and still works when your business grows.
Summary
Choosing a warehouse location is a strategic decision that shapes how your operation performs day after day. It affects transportation costs, labor stability, service levels, and your ability to grow without disruption. In other words, this decision goes far beyond securing a building—it influences the long-term financial health and competitiveness of your business.
By evaluating locations using the seven criteria outlined in this guide, comparing options with a consistent framework, and validating your final choice with a practical checklist, you reduce risk and make the decision more defensible. The goal is not to find a “perfect” location, but one that aligns with your operational needs today while remaining flexible enough to support future growth.
Once you finalize your location strategy, set up the facility for success. Applying sound warehouse layout and design principles will help you make the most of your space, improve workflow, and support efficient daily operations.
For more insights on warehouse operations and supply chain strategy, follow Cyzerg on LinkedIn, YouTube, X, or Facebook. If you have questions or would like to discuss your warehouse planning needs, feel free to reach out through our contact page.
