Deciding whether to own and operate a warehouse or engage with a third-party logistics (3PL) provider is a strategic choice that significantly affects cost structure, service performance, operational resilience, and overall enterprise value. This article outlines a practical framework to evaluate both models to determine which model best aligns with long-term business strategy.
What You’ll Learn:
Many companies rely on third-party logistics providers (3PLs) to operate their warehouses. The appeal is clear: minimal upfront capital, rapid deployment, and the ability to flex space and labor as demand changes. This approach is especially attractive amid unpredictable sales cycles and shifting inventory needs. Newmark data shows logistics providers accounting for roughly 36% of major industrial leasing activity in 2025, as retailers and manufacturers leaned on outsourced capacity to absorb short-term fluctuations.
The flexibility that a 3PL can provide, however, comes with trade-offs. What begins as a low-risk model can become more expensive and more restrictive as volumes stabilize. When companies compare total cost, operational performance, and long-term financial impact side by side, ownership, whether staffed internally or supported with contract labor often delivers superior results.
The industrial real estate market reflects this shift with direct purchases by operating companies increasing significantly in recent years, reaching record levels in 2025. Over that period, users expanded their share of total industrial transactions from approximately 3% in 2022 to nearly 10% just three years later.
Companies are increasingly treating warehouse ownership as a strategic investment rather than a fixed cost, with retailers leading the charge. Amazon has been among the most active buyers, while professional and business services users have also increased activity—driven in part by large government‑related warehouse acquisitions—according to Newmark’s 2Q25 U.S. Industrial Market Conditions & Trends report (Registration required).
The Hidden Cost Structure of the 3PL Model
Traditional 3PL pricing is commonly packaged as an “all-in” rate that bundles rent, labor, supervision, systems, overhead and provider margin. While simple, this structure can obscure the true cost drivers. Provider margins on management, labor and overhead typically add a 10%- 25% premium to the run-rate. Overtime, temporary labor surcharges, change orders, and pass-throughs for pallets or packaging can push the effective cost higher.
Over a multi-year horizon, these incremental charges can push the cost of using a 3PL to exceed the fully loaded cost of an owned facility, especially in networks with steady or growing volumes.
Cost-plus arrangements are often positioned as more transparent, but control over how expenses fluctuate remains limited. As volumes change, so do labor costs, overtime levels, and management fees, creating variability that makes it difficult to manage operating expenses relative to revenue.
Ownership changes that equation. With direct control of labor and operations, budgets become more predictable and cost drivers more visible. Labor, utilities, maintenance, and overhead can be forecast with greater accuracy, allowing leadership to manage operating expenses as a percentage of sales and align productivity initiatives with revenue growth.
Ownership also allows the separation of fixed real estate costs from variable operating expenses. Eliminating embedded 3PL margin on rent, management, and overhead typically reduces annual facility costs by 8% -15%. Direct control of labor enables better staffing models, shift structures, and incentive programs, often lowering labor cost per unit by 5% - 10% through improved productivity and reduced turnover. Even when third-party labor providers are used, companies retain leverage and avoid paying margins on space, systems and unnecessary management layers.
Cost Drivers by Operating Model: 3PL vs. Owned
The chart below shows where margins and variability occur across warehousing models.
Operational Performance Advantages of Ownership
Most 3PLs are optimized to standardize processes across multiple clients. That scale creates consistency but can limit customization and slow response time to shifts in stock keeping unit (SKU) mix, order profiles, or service requirements. In addition, any operational changes that affect the warehouse management system (WMS) often come with added fees.
An owned facility can be engineered around a company’s demand patterns. Layout, slotting strategy, material flow, and labor planning are designed to the specific profile, not the average customer. The ability to control these warehouse design and operations concepts, routinely drive 10%-20% gains in throughput, faster order cycle times, and better dock-to-stock performance, particularly in high-velocity or e-commerce environments.
These advantages compound over time as continuous improvement initiatives are implemented. Investments in data science, process optimization and automation accrue directly to the operation rather than a third-party provider.
Strategic and Financial Benefits of Ownership
Beyond cost and throughput, ownership provides strategic and financial advantages that outsourced models cannot fully replicate.
When 3PLs Make Sense
Decision Triggers: Is It Time to Evaluate Ownership?
Conclusion
3PLs play an important role, particularly for market entry, periods of rapid growth or significant demand volatility. Once volumes stabilize, many companies find that ownership to be more cost-effective and higher performing.
Ownership removes embedded margins, enables purpose-built operations that improve throughput and service, tightens control over operating expenses, and creates long-term strategic flexibility. A 3PL must optimize across multiple clients; ownership lets you optimize your business, and that advantage compounds over time.
Next Step: If distribution volumes are stabilizing or growing, an analysis that models whether warehouse ownership reduce costs, improve operations and service level performance across the network. This will help quantify the financial and operational impact of owning versus outsourcing a distribution footprint.
Executive Managing Director
Managing Director, Head of North American Industrial Research
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