This is Part 8 of a multi-part series on investing in Self Storage assets.
In previous posts, I have written about the various self storage topics.
Today’s post is about construction of self storage and all the issues you will need to be aware of.
There are many interesting construction and development costs in self storage. Many facilities have been constructed very cheaply and crudely at a low cost. There will be future facilities supplying different degrees of service. Consequently, there will be varied rental rates and development costs in the storage industry.
Another construction cost characteristic of self storage is that a large portion of the construction expense is for manufactured components versus hand built construction. Doors, mullions, header panels, steel panel partition systems, prefabricated roof systems, precast support and appearance columns, wall panels, etc. comprise the majority of the structures. This situation permits more stable construction costs over time, reduced impact of unfavorable weather during construction, and a shortened construction period. The use of these components also results in a similar level of cost for structures in all regional areas.
Typical self storage facility designs include a management office and a resident manager’s apartment within the site. Some operators chose to operate the self storage project without a residential apartment with a great deal of success. Typically, the off-site management company/person will determine whether or not a residence is desired for the specific location. The management office is usually 1,000-2,000 square feet and is used for the rental office, the showroom for retail products, truck rentals, and other services.
There are no absolutes pointing to the “perfect design” or the “best construction” in the self storage industry. Construction techniques depend upon a number of variables. These variables include: climate, building code requirements, zoning restrictions, and neighborhood surroundings (the facility should blend in with the other structures in the area). In addition, certain areas may best lend themselves to renovation or conversion of an existing structure and sometimes the use of movable modules or modified intermodal containers to house storage units.
There are several choices as to type of construction. Basically, these include metal buildings, combination metal and block, tilt wall, wood frame or modular. Each type has its pros and cons. A visit to one of the many industry trade shows will demonstrate the various types of construction used in the “state of the art” self storage structures.
Design of the rentable space depends on the type of tenants you identified in the market feasibility study living within the few miles surrounding the site. Multi-family units create demand for smaller units. Business tenants generally prefer larger units. College students and young singles prefer smaller units. Another thing to consider during design is effective management of the facility. Proper design of a facility can facilitate built-in control by the manager and greater security. The office area should assist the manager in controlling the activities of tenants. Another consideration in design is to try encourage upper middle income tenants and business tenants to choose the facility.
A good design will also minimize parking and traffic problems and make it possible for emergency access. Width of driveways and loading areas are critical decisions. A common mistake seen by many developers is to sacrifice needed paved areas for turning (i.e., semi trucks, moving vans, etc.) to provide for greater utilization of land for rental space.
Special attention is necessary for facilities that include elevators and enclosed hallways as the sole access to some units. Such “housekeeping” considerations as lighting, drainage, etc. are affected by design as is the type of landscaping used at the facility. Lighting, door alarms, video surveillance, fencing, and gates determine the level of security at the facility.
Come back for more information on self storage, or set up a call with me to discuss how you can invest alongside me. Set up your call here.