Why self storage?

Self-storage construction remains a best value rating in real estate investments.  The cost per square foot to build is very palatable for developers large and small.  Return on cost per square foot at retail can be very lucrative.  Operating costs are minimal and vary slightly by location, as well as optional services a facility chooses to market. To obtain a better understanding of the industry and the opportunity, visit the Self-Storage Association web page.    

How do I get started developing a self-storage building project?

Research self-storage building suppliers.  When you contact a supplier, ask the tough questions. Are they a supplier/member of the Self-Storage Association?  Will they provide a list of references and locations of facilities they have built?  Is their design and engineering done in-house or subcontracted?  Are they a manufacturer or a broker (brokers subcontract everything)?  If they manufacture their products, can you visit the plant?  Are they able to supply full turn-key service on the project?  Do they manage their own installation crews?  To sum it all up, the development stage is very critical to the success of your facility.  If you choose to opt for a supplier who provides less than full project capability, beware.  To get ideas about how you might want your facility to look, visit others in your area.  Also, visit with the owner of a facility in your area. 

How much money does it take to develop a self-storage project?

As a rule of thumb, most lenders like to see 20% to 30% cash equity and ample operating capital for the first 12 to 18 months.  However, this can change based on land disposition, etc. 

How much land is needed?

This will vary according to desired self-storage building size.  A two to three acre plot of land in most instances can support a 30,000 to 40,000 square foot project of single story buildings.  Where land is at a premium, it is necessary to build multi-story buildings to get the square footage of rental space to make the project operable. Remember, it is far better to spend a little more for the right location than to get a good deal on a bad location. 

If I have a piece of land, how do I know if self-storage is a good fit for the site?

Contact your local building permit office to establish if there any set-backs, etc. required to build on the property.  This is where a full service supplier can be a big help in determining the feasibility of the site. After the information is compiled, they can supply you with a suggested layout of the self-storage buildings and how they would fit on the property to give you the best curb appeal and retail frontage. 

Does it take a large facility to make money?

Not necessarily.  A large or small facility in the right location has a much better chance to be profitable than one in a bad location.  Location is the key. 

How can I determine whether a market is suitable for more self-storage or if it is saturated?

The word saturation can mean different things.  Is the retail market over built with too many small units and not enough larger units or vise versa?  Visit some existing self-storage facilities (old and new) to get an idea of what size units they are renting.

If you are considering building in an area that has a strong showing of self-storage construction, don’t give up.  They are there for a reason.  How many are new?  How many of them offer climate-control?  What marketing programs do they use other than the yellow pages?    

How does self-storage construction compare to other investments?

It is still one of the highest values in real estate investment, for not only the national REITS, but for the smaller regional developer as well.  

Do I need a business plan?

A business plan is always essential. It paves the path to success. 

How do I find the right location and size?

If you are working with a full service supplier, they can provide for a feasibility study to be done in a cost effective manner.                         

Who helps me with the permitting process?

This is part of the full service supplier’s support.  He can help guide you through the needed steps of the entitlement process.

How critical is site work?

Site work can be very costly if you do not have a supplier with the expertise to connect you with a reliable site work contractor. 

What information should I provide my financial institution?

Pick three financial institutions with whom to start the process.  Meet with each one and show them your conception of the project, projected cost to build, and projected financial performance.  If you have a feasibility study, take this with you as well.           

Is there a standard self-storage building design? Does it cost more to custom design for self-storage construction? 

There is no standard design.  Cost and design of buildings are sometimes driven by the local architectural covenants.   

What are the risks of acting as general contractor myself for my project? 

Very simple:  whom do you call if there is a problem?    

Can I build in phases?

This is sometimes a good strategy, if you are unsure about the proper market mix of climate and non-climate buildings and unit mix. 

What are the financial requirements to deal with a self-storage building manufacturer? 

Confirmation of financial commitment from your lending institution.  Some terms are negotiated, but normally a 15% to 20% down payment at the signing of the contract is required.  Payment of the balance is upon delivery of steel and services at the job site.