So, You’re Considering Building a Self-Storage Facility?
If you've set your sights on entering the self storage market, you're likely wondering, “Where do I begin, and what’s it going to cost?” Developing a successful facility involves far more than just finding a piece of land and breaking ground.
To thrive in this competitive industry, you need a thoughtful approach that aligns location, market demand, and financial feasibility. The concept may seem simple—identify a promising site, acquire it at a good price, and build what the market needs—but executing these steps effectively is where the real work begins.
When picturing your future self storage project, start by asking yourself, “What type of facility should I build?” Surprisingly, your budget shouldn’t dictate this decision; it’s the market demand that should. Conducting a thorough analysis of the surrounding market will guide you toward making informed decisions about storage unit sizes, quantities, and price points.
For traditional self-storage facilities, this means closely examining the competition within a 1-to-5-mile radius. Look at occupancy rates, rental rates, and unit availability at nearby facilities to identify gaps in the market. Once you have this information, you can estimate potential income by multiplying the rental rates by the number of storage units in each size category. Comparing this projected income against expected costs, like taxes, insurance, and mortgage payments, will give you a realistic view of the venture’s financial viability.
With market research in hand, it’s time to take your concept to the next level and begin setting up your budget. Crafting a comprehensive self storage budget is crucial to ensure your project doesn’t encounter unwelcome financial surprises.
A good budget provides a clear plan and keeps your project on track with your vision. More importantly, it also helps manage costs during the project so you stay on track. Here’s a summary of what a self-storage construction budget should include, as well as some tips for managing your project in today’s changing economy.
Think of your budget as a blueprint for your self storage project’s financial success. A budget is not static; it will evolve at every stage, allowing you to keep costs in check and adjust as needed. Without this financial guide, you risk overspending in areas that don’t add value or even running out of funds midway.
Setting a preliminary budget early on is critical. Jeremy Maynard, VP of MakoRabco (and previously a General Contractor) explains the importance of setting up your self storage budget early, "Creating a baseline construction budget gives the owner a quick overview of potential costs for the project, highlighting key factors that are often overlooked, such as site soils, topography, and the specific infrastructure requirements set by local jurisdictions." These foundational aspects are essential for evaluating a site’s suitability and outlining the broader financial structure of the project.
Your budget will likely require adjustments as you progress through each development phase. Each iteration allows you to refine your approach, addressing any changes that arise and enhancing accuracy. Early budget planning also plays a vital role in determining how you’ll finance the project. Will you rely on personal funds, a construction loan, or outside investors?
Throughout this process, it’s wise to build in flexibility. Construction inevitably comes with unanticipated changes, but making small strategic adjustments—like substituting materials or modifying construction techniques—can help keep costs under control. As Jeremy points out, “As you progress through zoning and planning reviews, adjustments to your preliminary construction budget are often necessary to stay aligned with your overall financial plan. New requirements may arise, but by making strategic concessions—such as substituting materials or modifying construction methods—you can adapt without straying far from the initial budget.”
A comprehensive construction budget should cover the following areas:
Land Costs: Purchase price and property taxes.
Construction Expenses: Materials, labor, site preparation, and infrastructure.
Design and Engineering Fees: This covers architects, engineers, and consultants.
Permits and Inspections: Factor in local and state regulatory costs.
Contingency Fund: Set aside 4% to 8% of your budget to handle unforeseen expenses.
Marketing and Initial Operating Expenses: Include costs for pre-opening advertising and initial operations.
In today’s climate, inflation can have a significant impact on construction costs, especially for materials and labor. Jeremy advises, "The key to minimizing the impact of future inflation is understanding the specific construction markets you're working in. If you're unfamiliar with a particular market, don't hesitate to ask questions. We've found that asking about market stability is not only non-offensive but often appreciated. It shows you're being proactive and mindful of potential future costs." By building early relationships with local suppliers, you can often secure materials at current rates, shielding your project from future price hikes.
Monitor Market Trends: Staying informed about price trends allows you to adjust your plans if necessary, whether that means changing timelines or scaling your project.
Secure Prices at Strategic Moments: Lock in prices for materials and labor when the market is favorable. While predicting the future isn’t easy, securing costs at the right time can protect you from potential price hikes between the planning phase and the start of construction.
Value Engineering: Collaborate with your team to explore cost-effective alternatives that don’t compromise quality.
Adjust the Timeline: Adjusting your schedule strategically can help save on costs by timing purchases or phases to avoid peak pricing periods.
Even with meticulous planning, surprises can arise. To prepare for these surprises, Jeremy stresses the importance of proactive planning: “I’ve seen cases where a pre-application meeting approves a specific design, only for it to be completely overridden later by design review boards or neighboring community committees. To prepare for the unexpected, it’s crucial to do your homework—visit surrounding communities and engage with as many local officials as possible about your project and design ideas.”
Jeremy recalls a real life instance where local opposition to an already approved design required a swift redesign to keep the project on schedule. By having already established relationships with local officials and understanding the community's preferences, the team was able to quickly adjust the design, avoiding costly delays and keeping the project on track.
Common Unplanned Factors to Anticipate
Weather Delays: Unexpected weather can affect construction timelines. Allowing extra time for seasonal challenges is smart.
Permit and Zoning Setbacks: Keeping open communication with local authorities is important. A knowledgeable team can help reduce risks related to permits and make sure your project stays on track.
Supply Chain Interruptions: Plan ahead for potential disruptions, and consider ordering essential materials early when feasible.
Establishing a detailed, adaptable budget is essential for the success of your self storage project. By setting a financial foundation that evolves with each project phase, you can handle unexpected costs, inflation, and other common challenges with greater ease.
Jeremy offers this closing insight: “Partnering with a General Contractor early in the process gives you critical insights into current market costs across the construction industry and aligns you with a partner committed to seeing your project through to completion.” A knowledgeable GC can help you navigate every step, from preliminary budgeting to value engineering, ensuring your vision becomes a reality. Don’t hesitate to lean on professionals who know the ins and outs of self storage construction to guide you through the process.
Want to speak to a MakoRabco expert to start your self storage project? Reach out to us here!