Over the past three to four years, the Canadian self-storage industry has seen multi-story construction skyrocket. Several multi-story storage facilities have been built in and around the Greater Toronto area. In the Quebec area, one facility towers several stories.
An internal conversion of an existing building will generate a revenue stream much faster than a new build. This type of development puts high-priced, industrial properties within reach of the self-storage developer. This is especially effective when the price of land suitable for a self-storage facility could outweigh the return on investment.
Urban Multi-Story Mandate
Multi-use buildings are high in demand and often come with a hefty price tag that initially makes a self-storage conversion cost prohibitive. A multi-story internal conversion can put the project back in financial range. For these conversions, your investment will initially cost more per square foot than a single-story but your revenue could more than double.
Construction costs can increase because the first-floor conversion now becomes a structural design that requires a fire rating for the support members now holding up the new second level floor. The installation of elevators will also drive the overall square-foot costs above a comparable single-story construction. However, the final cost of this type of development does not double but your income potential may.
Double Your Revenue Streams
Let’s review the potential increased revenue stream of a two-story development versus single-story. In addition to rental units, there are required areas that take up valuable space on a single-story facility. These areas won’t be needed on the second floor. For example, it is normal to have covered or staging areas for your customers to offload. Also, the facility needs dedicated space for a government-mandated wheelchair washroom as well as retail. Administration and reception areas are becoming more elaborate in design and sophistication. Management office space is often designed to accommodate small meetings. Also, utility and electrical rooms all absorb rentable space.
These elements will not be required for the second floor where the space is converted into units designed solely to contribute to the revenue stream. By more than doubling your income by having the second floor available to rent, you can now look at buildings that were well outside your preset purchase range. This makes many locations available that you would have previously ignored.
When Size Matters!
Many people would agree that a facility with 60,000 to 65,000 square feet of rental space is an ideal operation. To create a single-story facility of this size will require 2.5 acres of property. Based on a three-story development, the same self-storage operation can be created on three-quarters of an acre. The difference in the land square footage is drastic but the potential income is the same.
A single-story building with a 30-foot clearance offers the same development square footage as a two story. And if a two-story conversion makes sense, calculate the returns of converting a building with a footplan of 25,000 square feet into a three story.
The fast-track construction method is ideal for an internal conversion. Once a suitable location has been found, a list of items and timelines should be established:
- Are the original floor plans and/or foundation drawings available?
- What is the architect’s turnaround time on code-ready building permit drawings?
- What is the city’s turnaround time for building permit approvals?
- Is the contractor motivated to a fast closing date?
- Are all required construction trades available?
This list will give you an idea of the required time it will take to get to first date of construction. Remember, when you take possession of the building you also take possession of the bills. Cost can be controlled by being ready to begin construction when you assume ownership of the building.
When you have satisfied the conditions and are ready to close on the property, the architect should have the required code-ready drawings for submission for building permits ready. In addition, the following requirements should already be in place:
- Contract signed with general contractor.
- Demolition permit approved.
- All sub-trades contracted and ready to begin work.
The expected timeframes for construction will vary due to the size of the project. Careful planning, preparation and due diligence will limit untimely construction delays and unwarranted expenses. By following this outline, your building conversion has the maximum chance to be profitable.
Shawn Baker is the sales and marketing manager for Ontario-based Canadian Metal Manufacturing Inc. (CMMI), the developer of Turnkey Self-Storage Systems for the Canadian market. Established in 1999 as a metal fabricating company for the general building construction,CMMI turned its primary focus to the self-storage industry in 2003. For more information, call 888.951.1762; visit www.canadianmetal.ca.