Whether you are building your first self storage facility or own one that you want to upgrade, deciding on what key features you may want to include can be challenging. That’s where the team at Forge Building Company can help. We can work with you to determine upgrades and features that make sense, not just from an aesthetic perspective, but financially, for both the short and long term.
When it comes to making physical improvements, you need to be smart. Invest in upgrades that will improve the customer experience and add to your bottom line.
The following are some suggestions and ideas.
So where do you start? According to Steven Wear of IMPACT Self Storage, when it comes to facility improvements, there’s a return multiple for every dollar of increased net operating income (NOI). Cap rate is calculated by dividing NOI by value or price. If a self-storage property trades at an 8% cap, for every $1 that NOI increases, facility value grows $12.50.
Any upgrades that affect the trading cap rate also result in a return multiple. By improving a property’s class ranking, the cap rate will decrease. If a facility with NOI of $100,000 is improved so someone will buy it at a 7% cap as opposed to 8%, there’s a profit increase of more than $178,000.
When considering value-add projects to include when building or renovating your self-storage facility, any investments that can improve asset class and increase NOI should be prioritized. One example of this would be taking traditional units and converting them into climate-controlled spaces. Facilities that do this often see an increase in rental rates as well as a better class. However, the increased utility expense prevents the owner from capturing 100% of the rate increase, but if there is an overall positive impact on NOI, then it’s a good investment.
When you think about what features to add to your facility, something to consider is that while paint and landscaping may not necessarily add a lot of value to a facility, if a lack of new paint and attractive landscaping results in customers not wanting to rent there, then improving those items will result in an increase to NOI.
There are a lot of functional items that will improve the appearance and carry more benefits than an indirect valuation increase. Two of these, for example, include paving and fencing. Many times, our customers run into self-storage loans that carry physical requirements. For instance, commercial mortgage-backed securities loans have some of the most favorable terms on the market but usually require that a facility be paved and fenced.
Does adding or upgrading your facility with sustainable improvements make financial sense? Typically, when self storage units have been in operation for a while, there are usually many ways to improve their sustainability and energy efficiency that will add to the profitability of the facility.
When trying to sort all of this out when you are looking to remodel an existing facility or build a new one, consider partnering with a steel building contractor, such as Forge Building Company. We have over 15 years of experience building structures that are energy-efficient and use low-energy lighting, but without compromising on items such as a high-quality, modern HVAC system.
Many self-storage facilities are constructed of steel, which is already very durable. With Forge, being a steel building expert, we use Galvalume in the buildings we erect. This is a proprietary coated steel, that prevents corrosion and deterioration that could result in a compromised building envelope and energy leaks. We also highly recommend that the insulation is sufficient to regulate unit temperature. Rigid foam insulation infused with non-toxic borates is a great solution that also discourages pests.
Solar panels or efficient roofing, such as the standing seam roof panels used by Forge, is another benefit to steel construction. Roof coatings with a high percentage of infrared reflectants help maintain a more stable building temperature. A “cool” finish can reduce surface temperature by up to 38 degrees and save on energy costs by about 23%.2
Retrofitting energy-efficient lights is another great way to reduce electricity consumption. Alternatively, consider fitting larger lights with a motion sensor, so they either dim or turn off completely when there’s no activity. While installing LED lights or sensor switches might seem tedious on the surface, they will be much cheaper to run and maintain in the long run.
Lower energy use isn’t only sustainable, it creates economic savings for business owners and customers.
For other sustainable improvements to consider, see our blog titled, “Sustainability in Self Storage Facility Renovation and Projects to Consider.”
With the explosive growth in the boat and recreational vehicle (RV) market, adding boat and RV storage may boost your bottom line quickly if your market warrants it. And there are many options when adding this type of storage from open canopies to storage condos.
With storage condos, many of these facilities are adding fire sprinklers, electrical outlets, fluorescent lighting, and individual door alarms. Many also offer 24-hour access with alarm monitoring and 24-hour video protection. The large sectional doors are sealed on all four sides. Driveways are 56 feet wide to allow easy parking of these large vehicles. Many of the storage condo buildings are plumbed for water so customers can wash vehicles in front of their units before storing them. And many offer an RV-waste dump and separate bathrooms with showers for men and women.
Many of these types of facilities are creating a new culture where the owners of these “toys” come to store their vehicles and then end up hanging out for the evening.
Facility improvements aren’t just about increasing value and adding immediately to your bottom line, but also maintaining it. So, weigh your options carefully and invest wisely. The team at Forge Building Company welcomes the opportunity to help you choose value-add projects based on how positively they affect the asset from a financial point of view. Let’s connect.
1 Wear, S. (2021, September 25). Inside Self Storage. Retrieved from Insideselfstorage.com: https://www.insideselfstorage.com/facility-value/value-add-projects-self-storage-making-smart-upgrades-yield-positive-return
2 Barnard, J. (2018, September 14). Retrieved from Inside Self-Storage: https://www.insideselfstorage.com/eco-friendly-storage/differentiation-through-sustainability-green-ideas-self-storage