From an obscure investment to the darling of commercial real estate
If we measured the success of our economy based on Americans’ need to store excess possessions at the local mini-storage facility, I would say that the country is getting back to a fat and happy mentality. The train that saw the light at the end of the tunnel 12 months ago is officially on track in the light of day.
Self storage as an investment has made major strides over the last decade, from an obscure placeholder investment to the darling of commercial real estate. Its popularity, peaking at a time when other commercial investments were in the tank, is largely due to its financial strength even when the economy was at its weakest.
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| Photo coutesy of Mako Steel |
While existing self-storage investments flourished during that weak time, the new groundup construction inventory sputtered in the early months of the recession, and then suddenly and violently came to an abrupt halt. New development stayed on pause for several years, and then, almost as abruptly as it stopped, the engines roared back to life, all at once, everywhere.
While there are a few new obstacles for the self-storage train to pass through today, the principal rules of self-storage construction remain unchanged. The design is basic-once you get past the architectural aesthetics required on most facilities today, and it’s repetitive, which can make it easy to budget and predictable.
If it sounds simple, it’s because it is … in its own way. Regardless of the simplicity, it’s still a specialized niche construction, with its own subset of experts that can help builders and developers make good construction decisions.
The Market Study
One of the first mistakes developers and builders make is neglecting to hire a market expert. This is key because it will outline specifics on how much or how little square footage a specific market can absorb, and what type of storage will be most profitable. A good study will also recommend a mix of unit sizes tailored to the type of market the facility will be built it. While these studies have an upfront price tag of $5,000-$7,000, they provide information related to projected income and return on investment (ROI), and are often the benchmark lenders use to determine the viability of a construction loan for new development. Even the most seasoned developers agree that it is a small price to pay for peace of mind.
Concept Planning and Budgeting
Once a market study is complete, you may find that the metal building companies that specialize in self storage are a great place to start for concept planning/budgeting. Often, these companies have in-house engineering services, and the experience and understanding of the whole picture to help facilitate rough budgets. Oftentimes the preliminary budgets, concept plans and feasibility studies are the perfect mix of due diligence to make an educated decision on risk versus benefit when deciding whether or not to build self storage.
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| Photo courtesy of Mako Steel |
Assembling Your Construction Team
Because self storage is such a specialized business, the industry has its own specialty resources for a variety of trades. Most self-storage construction projects today have an architect, general contractor, metal building contractor and an installer working in tandem to help produce an economical and industry-standard project. It is recommended that you look for a self-storage experienced team. Despite its simplicity, the learning curve, like anything else, is a vertical line. A reputable and experienced group of designers and subcontractors will save money and time.
Chances are, if you’re active in metal building construction, someone will ask you about self storage sometime in the near future. After all, it’s the trendy commercial real estate investment these days, with a ton of upside and a lot of momentum.
Fortunately, it’s a friendly industry, with great online and human resources that can help provide a newbie developer or contractor the tools necessary to successfully execute a new project. So, if our crystal ball is correct, and self storage becomes the hot topic in the ensuing months, don’t be afraid to hop the train. All aboard!
Angie M. Guerin is national sales manager at Mako Steel Inc., Carlsbad, Calif. To learn more, call (760) 448-1760 or visit
www.makosteel.com.
