Despite all of the craziness that the pandemic has caused, self-storage development continues its forward momentum—but not without impediments. The cost of raw materials is on the rise, and orders can take longer to ship, plus there are labor shortages. These issues will likely resolve in time, but there’s one obstacle poised to grow still more obtrusive: a lack of suitable sites on which to build. Between market saturation and increasingly restrictive zoning, builders and owners struggle to find suitable parcels to build self storage facilities. It’s a process that’s often taking longer and generating more frustration.
What Every Self-Storage Investor Needs to Know Before Building
Every self-storage construction project has its own nuances, and it’s never a “one size fits all” when it comes to construction but following are some basic “rules of thumb” to help point you in the right direction.
Additionally, also see our blog post, “Building a Commercial Storage Building” for more insights into understanding development fundamentals.
Regarding the property
- Most new self-storage development projects that incorporate single story buildings are developed on parcels between 3-5 acres. Each acre (provided the property is normally shaped) will yield approximately 17,500 – 18,000 square feet of rentable space or 40% coverage ratio.
- Property should be zoned correctly for self-storage. Your self-storage facility would ideally be on a “use by right” parcel. Conditional use permitting is common with self- storage construction but will likely cause higher than average construction costs to appease neighboring businesses or residences by utilizing more expensive architectural aesthetics.
- The property should be visible with good traffic counts. There is no better marketing strategy in the self-storage industry, than people simply knowing where you are by seeing your business when they drive down a particular street on a regular basis.
Preliminary Due-Diligence
- Once suitable parcels to build self storage are identified, a market study will help determine whether the “market” will support more inventory. Demand need s to be determined for more rental, and what type of storage might be best suited for the parcel (i.e., climate controlled, boat and RV, etc.) The typical cost for Feasibility Analysis is between $2,500-5,000.
- Prepare a concept site plan. A concept site plan based on good plat map information will give you an idea of how much square footage can be built on the parcel and will provide a baseline to help with construction budgeting.
Establishing Financial Feasibility
- Most self-storage facilities built today require about 60,000 square feet to support a full-time employee and allow an investor to maintain a “hands-off” approach to the business. The industry average rent nationwide is around $1.01 per square foot in 2023 (source: sparefoot).
- Your rental rate per square foot is the single most important factor in determining financial feasibility. When a parcel is identified – the first step an owner should take is to determine what a baseline rental rate would be by “shopping” your potential competitors (Competitors are usually defined by a one-, three- and five-mile radius from your site). The higher the rental rate, the more you can afford to spend on construction and still maintain an adequate ROI.
Self-Storage Building Costs
- For single-story units, expect to pay $25-$40 per square foot, but multistory self-storage units typically cost $42-$70 per square foot. Additional cost factors like electricity, plumbing, and security systems can add $15-$45 per square foot.
- In terms of constructing storage unit buildings, the cost can be relatively affordable. Depending on the region and building size, expect to pay $25,000-$100,000 for simple, steel buildings with 10-50 units. The cost to build storage units can be surprisingly within reach.
For a sample of the types of single-story self-storage buildings that Forge Building Company offers, please check out: Single-Story Self-Storage Building Contractors
And for more information on costs and location considerations, please see our blog titled “Contractors That Build Commercial Storage Buildings & Facilities.”
Finding a suitable parcel on which to build a self-storage facility with the best steel building contractor will also reap the highest return on investment and get your 2022 off to a great year.
