Overcoming Self-Storage Development Hurdles in Canada

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By Molly Bilker

The Canadian self-storage market is handicapped by limitations on development. Saturated markets mean higher land costs. Building codes and guidelines are stricter than those in other countries and can cause costly changes in development plans.

Despite such setbacks, the market continues to expand, and self-storage is finding a footing in rural areas and small towns where it was once unknown. In addition, rental rates are gradually increasing and demand is picking up, says Marc Goodin, a civil engineer and owner of Caraquet & RV Storage in Caraquet, New Brunswick, Canada.

The Rising Cost of Building

Though the Canadian self-storage market regularly sees new development and an increase in renters, builders face a number of challenges. In some areas, land prices are rising because the markets are flooded, explains Jamie Lindau, sales manager for Trachte Building Systems, a U.S.-based developer that works regularly with Canadian facility owners and investors.

Inflating land prices raise the break-even analysis, which includes the combined costs of development and land, and returns become more unstable. As such, more money is needed for the down payment, Lindau says. "The availability of money is there, but you need a lot of capital yourself to get into the business.”

Rigid development guidelines also inflate building costs. Development is guided by building codes, which can vary greatly depending on the region. For example, there’s a requirement in Saskatchewan that firewalls must be added between all units or sprinklers should be added inside the building. For this reason, Lindau says, most developments in the region are all single-story to scale back on the expenditures. "The cost to develop is a lot higher, but also, the rental rates are higher," Lindau notes. "The cost is easily 30 percent more [to build] than in the United States."

In British Columbia, however, development costs have dropped. Prices are alleviated by the province's abandonment last April of the harmonized sales tax. Now that the tax has been rescinded, storage rents are once again exempt from the 7 percent sales tax, which is still in effect in Labrador, New Brunswick, Newfoundland and Nova Scotia.

Migration Continues

The migration of residents about the country for personal or professional reasons also spurs new development. Saskatchewan's government and business practices have transformed in light of the province's oil-shale boom in recent years, which has caused more people to move there. With more people comes higher storage demand. "Where the people are moving to is where it looks like there's opportunity for development," Lindau says. "The Maritime Provinces might be closer to saturation, or areas like large cities in Ontario might be overdeveloped. Not everywhere is a great place to build. You have to check it out."

Other trends have begun to emerge. More developers are building climate-controlled units with radiant floor heat to keep them warm during the frigid Canadian winter. Multi-story facilities and conversion projects are becoming a trend in large cities, where self-storage operations are concentrated as well.

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