Steel trade tariffs imposed by President Donald J. Trump are driving up the cost of self-storage developments already underway or in the pipeline across the nation, causing owners and investors to rework their financing to cover construction. The uncertainty of how inflated steel prices may affect future building also has some developers worried the industry could be headed for a construction slowdown, according to “SpareFoot Storage Beat,” an industry blog.
In some cases, the tariffs have prompted developers to add up to 10 percent to final project-cost estimates, the source reported. “We’re seeing a lot of people coming back to us to re-work [the numbers],” said Terry Campbell, general manager of Live Oak Bank, a lender that focuses on specialty industries including self-storage. “We always have contingency costs built into [financing plans], but we’ve basically had to double our contingencies. The tariffs are definitely having an impact.”
Though most projects in the pipeline are still being pursued, steel prices have increased about 30 percent in the last year, causing some builders to wonder if developers will choose to forego new projects or expansion plans. “I’m worried about a slowdown,” John Bull, owner of Oregon-based John Bull Builders LLC, told the blog. “We still have projects. There’s still a lot of work in the pipeline. But I’m worried about what comes after that. It’s not a good thing. People are getting nervous. The prices are getting higher, and people are having to jump through a lot of hoops to get things done.”
Trump announced a 25 percent tariff on foreign steel in March, which was largely targeted at China imports. In June, the president extended the tariff to include steel from Canada, the European Union and Mexico. Though the implementation of the tariffs was recent, the threat of imposing them for more than a year prompted steel prices to inch upward, according to Caesar Wright, president of California-based Mako Steel Inc., which designs, supplies and installs steel buildings for the self-storage industry.
With the tariffs now underway, U.S. suppliers can leverage the market to command higher prices. “It’s a form of domestic greed,” Wright told the source. “But what can you do? The demand for steel is high, the supply is low. It’s been a challenge.”
In addition to higher prices, the market has been affected by a lack of available production to meet current demand. Campbell estimates it will take domestic and foreign suppliers not affected by the tariffs into next year before the supply chain stabilizes. In the meantime, he warns steel buyers to be wary of inferior product. “There may be better prices out there, but you have to be on guard,” he told the blog.
SpareFoot Storage Beat, Tariffs Take Bite Out of Self-Storage Construction Industry