Storage cost is what you pay to keep inventory in a place: the space (rent, or depreciation if you own the building), power and climate control, warehouse staff, racking, security and the building’s insurance. It is one part of carrying cost, which also counts the money tied up in the stock and the losses while it waits.
Below are the two formulas, a worked example per pallet and monthly rates from warehouse operators. Under IFRS and Ind AS, storing finished goods is an expense, not part of their cost.
Calculators for the numbers on this page:
- Storage cost from a rate: Storage Costs of Inventory Calculator
- Running cost of your own warehouse: Warehouse Storage Costs Calculator
- Stock you need to hold: Buffer Stock Calculator
- Which items take the space: ABC Classification Calculator
What do storage costs include?
They are the costs of the space and of keeping goods safe in it. In a warehouse you run yourself, that means:
- Space: rent or lease payments, or depreciation on a building you own.
- Utilities: electricity, gas and water, including heating, cooling and humidity control. A cold storage warehouse adds refrigeration.
- Warehouse staff: the time spent storing and looking after stock.
- Racking and equipment: depreciation and repairs.
- Security and fire protection.
- Insurance on the building and its equipment.
If you use a public warehouse, a third-party logistics firm (3PL) or Amazon’s fulfilment network, all of that arrives as one storage fee per pallet, per bin or per cubic foot, per month.
Three costs are often added to storage but are not storage:
- Handling: receiving, moving and picking goods. US tax regulations define handling separately, as costs of processing, assembling, repackaging and transporting goods. See warehouse material handling.
- Capital cost: the money tied up in the stock, or the interest on what you borrowed to buy it.
- Losses while it waits: obsolescence, damage, theft and expiry.
The last two, plus storage, make up most of carrying cost. Keep them apart: a guide that puts interest inside storage cost and then adds carrying cost on top counts the interest twice.
Storage cost vs carrying cost
Carrying cost, also called holding cost, is the whole cost of having stock on hand. Storage cost is the part paid for the space. They grow with different things, which is why the split matters:
| Cost | Grows with | Example |
|---|---|---|
| Storage | Space taken and time | Rent, power, warehouse staff |
| Capital | Stock value and time | Interest on the loan that bought it |
| Risk | Value, time and shelf life | Writing down stock that will not sell |
| Insurance and taxes | Stock value | Cover on the goods themselves |
Two other inventory costs sit outside carrying cost. Ordering cost is the cost of placing and receiving each order, which the economic order quantity calculator balances against carrying cost. Stockout cost is what running out costs you (stockout cost calculator).
Storage cost formula
There are two formulas. Use the first when someone bills you a rate, and the second when you run the space yourself.
1. When you pay a storage rate
Storage cost = rate per unit per period × units stored × number of periods
The unit is whatever the bill uses: a pallet, a bin or a cubic foot. The Storage Costs of Inventory Calculator does this multiplication.
2. When you run the warehouse yourself
Storage cost for the period = space + utilities + warehouse staff + racking and equipment + security + building insurance
Space is your rent, or for a building you own, its depreciation for the period. The diagram below and the site’s warehouse calculator write it as cost per square foot × area.
To compare with a quoted rate, turn the total into a cost per pallet position:
Cost per pallet per month = monthly storage cost ÷ pallet positions
Divide by the positions in use to get what each stored pallet really costs. Divide by all positions to see the cost if the warehouse were full. The gap is the price of empty racks.
Example of storage cost
A firm leases a 20,000 sq ft warehouse with 1,250 pallet positions, of which 1,000 are in use on average. The inputs are illustrative, not market rates: replace them with your own.
| Monthly cost | Amount (USD) |
|---|---|
| Rent | 18,000 |
| Utilities, including heating and cooling | 3,000 |
| Warehouse staff (storage share) | 6,000 |
| Racking depreciation and repairs | 1,000 |
| Security | 1,200 |
| Building insurance | 800 |
| Storage cost | 30,000 |
- Per pallet position: 30,000 ÷ 1,250 = $24.00 a month.
- Per pallet actually stored: 30,000 ÷ 1,000 = $30.00 a month.
- An item taking 40 pallets for 3 months costs 40 × $30.00 × 3 = $3,600 to store.
Storage fees are often quoted per cubic foot. A 48 × 40 inch pallet stacked 60 inches high holds 48 × 40 × 60 ÷ 1,728 = 66.7 cubic feet. This warehouse’s cost is then $30.00 ÷ 66.7 = $0.45 per cubic foot a month (our calculation).
How much does inventory storage cost per month?
It depends on how you are billed. Amazon charges by the volume of stored goods, India’s Central Warehousing Corporation per square foot or per bag, and 3PLs such as Fulfyld per pallet or bin. These are list rates from each operator’s own page, read on 30 October 2026:
| Operator | Monthly rate | Billed per |
|---|---|---|
| Amazon FBA, US, standard size | $0.78 January to September, $2.40 October to December | Cubic foot |
| Amazon FBA, US, oversize | $0.56, then $1.40 | Cubic foot |
| Amazon FBA, Canada, standard size | CAD 40, then CAD 77 | Cubic metre |
| Amazon FBA, Australia, standard size | AUD 37.00, then AUD 51.80 | Cubic metre |
| Central Warehousing Corporation, India | 15.99 to 58.42 | Sq ft of gross area |
| Central Warehousing Corporation, wheat | ₹6.36 to ₹15.97, insurance included | Bag up to 50 kg |
| Fulfyld, US 3PL | $32 at up to 250 orders a month, $16 at 10,000+ | 48 × 40 × 60 in pallet |
Amazon US adds a storage utilization surcharge of up to $1.88 per cubic foot for standard-size goods when a seller holds more than 22 weeks of sales in stock. New sellers, Individual sellers and anyone storing 25 cubic feet or less a day pay none.
In India, the CWC rate depends on the warehouse’s category: 15.99 per sq ft at the 59 warehouses in its lowest category, 58.42 at six sites including Okhla and Kirti Nagar in Delhi. Open-area storage costs 60% of the covered rate.
Put the example’s pallet into those units. Its 66.7 cubic feet at Amazon’s US standard rate comes to about $52 a month from January to September and about $160 from October to December (our calculation).
The example warehouse costs $30 per stored pallet and Fulfyld’s starter rate is $32. Amazon measures packaged units, not pallets, so treat the comparison as a rough guide.
Prices also rise. The US producer price index for general warehousing and storage went from 109.5 in December 2019 to 166.9 in September 2026 (preliminary), up 52% (our calculation).
Are storage costs included in inventory cost?
Under IFRS, no. IAS 2 lists, among the costs excluded from the cost of inventories and recognised as expenses when incurred, “storage costs, unless those costs are necessary in the production process before a further production stage”.
India’s Ind AS 2 and Australia’s AASB 102 carry the same words in paragraph 16(b). In Canada, IFRS is the GAAP for publicly accountable enterprises (SEC issuers may use US GAAP instead), and the Philippines adopted IFRS Accounting Standards as PFRSs, with exceptions that do not touch IAS 2.
So the cost of the warehouse where finished goods wait for sale goes to profit or loss in the period, not into what the goods cost. The exception is storage that is itself a step in production before the next stage.
US tax: off-site storage goes into inventory
For US federal income tax, the uniform capitalization rules point the other way. “Storage costs are capitalized under section 263A to the extent they are attributable to the operation of an off-site storage or warehousing facility”, while storage attached to a retail store is not required to be capitalized.
Capitalized costs become part of inventory and reach the tax return through cost of goods sold when the goods are sold, not in the year the rent is paid.
Smaller businesses are exempt. Section 263A does not apply to a taxpayer that meets the gross receipts test of section 448(c). For tax years beginning in 2026, that means average annual gross receipts over the prior three years of no more than $32,000,000.
| Rule | Storage of finished goods |
|---|---|
| IFRS (IAS 2), Ind AS 2, AASB 102 | Expense in the period |
| US tax, off-site warehouse | Capitalize into inventory |
| US tax, store’s own stockroom | Not required to capitalize |
| US tax, receipts up to $32 million (2026) | Section 263A does not apply |
How to reduce storage costs
- Know the cost per pallet. Work it out as in the example, so every slow item has a monthly price.
- Hold less. Find the items that take the most space for their value with ABC analysis, forecast demand, and size safety stock to the service level you need rather than by habit.
- Sell slow lines faster. Promote, bundle or mark down items that have sat longest.
- Clear dead stock. IAS 2 already requires inventory at the lower of cost and net realisable value, so stock that will not sell at cost gets written down anyway. Storing it keeps adding cost.
- Rotate first-in, first-out. Pick the oldest units first (first-expired, first-out for dated goods). Picking the newest first leaves the oldest stock on the shelf longest, which raises the risk of it expiring or going obsolete. This is physical rotation, separate from the FIFO or LIFO cost method in the perpetual inventory system.
- Use the height. Taller racking and a better layout put more pallets under the same roof.
- Re-settle agreements. Ask suppliers for smaller, more frequent, just-in-time deliveries. When a customer asks you to hold their finished goods, agree in writing how long and who pays for the space.
- Track it in a system. An inventory and warehouse management system shows what is where and how long it has been there.
- Compare with outsourcing. Set your cost per stored pallet against a 3PL quote for storage alone.
Why companies hold stock despite the cost
Each type of stock below carries a storage bill, which is why inventory management sizes each one on its own terms.
Cycle stock
Goods bought in batches run down between deliveries. The bigger the batch, the more you store.
Safety stock
Extra stock covers demand that runs above forecast or a delivery that comes late. Size it with the safety stock calculator.
Seasonal stock
Stock built ahead of a peak, such as a clothing range before winter, so the factory can run evenly.
Pipeline stock
Goods ordered and on their way. They take no warehouse space yet, but once paid for they tie up cash.
Dead stock is a cost, not a reason
Stock that no longer sells earns nothing for the space it fills. Write it down, sell it off or dispose of it.
FAQs
Why do companies keep inventory if storage costs money?
Because running out costs more. Firms hold cycle stock to cover demand between deliveries, safety stock for surprises in demand or lead time, seasonal stock built ahead of a peak, and pipeline stock that is on its way. Slow or dead stock is not a reason to store anything: it is a cost to clear.
Is storage cost fixed or variable?
It depends on how you pay for the space. Rent or depreciation on your own warehouse is fixed for the lease or the year, however full the racks are. A storage fee billed per pallet, per bin or per cubic foot each month rises and falls with the stock you hold and how long you hold it.
Which storage cost figure should you use?
- Comparing a 3PL or Amazon quote: your cost per stored pallet or cubic foot per month, storage only, handling apart.
- Setting order sizes or safety stock: the full carrying cost per unit per year, of which storage is one part.
- Your accounts under IFRS or Ind AS: expense storage in the period, unless it is a production step.
- US tax above $32 million of receipts (2026): capitalize off-site warehouse costs into inventory.
Rates and rules on this page were checked against the publishers’ own pages on 30 October 2026.
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