Building a self-storage facility is not a cheap endeavor, regardless of whether it’s traditional drive-up or multi-story, climate-controlled. From materials to labor, there’s a lot to consider. Thankfully, there are way to keep expenses in check. Following are six worthwhile strategies to help you cut costs on a traditional new build.
1. Go Big on Building Size
My contractors, particularly my excavator, are always telling me how much it costs them just to get the equipment to the site. In cold-climate markets, which have to deal with frost laws and load capacity on the road, this can be a significant obstacle. I’ve been told costs can range anywhere from $15,000 to $30,000 just to land the equipment. For this reason, I’ve found it’s easier to excavate bigger sites and spread out the costs.
For example, if I build 10,000 square feet of self-storage, I’m adding $1.50 to $3 of cost per square foot, whereas if I build 60,000 square feet, the cost to land the same equipment might be only 25 to 30 cents per square foot.
By building bigger, I can also have more flexibility in balancing the dirt on site. This can significantly reduce costs, if you don’t have to bring dirt in or transport it off site. If you’re using a general contractor, managing the construction of five buildings isn’t much more work than managing two buildings, so you also get better per-square-foot pricing with your contractors.
2. Build Bigger Pads
There’s a trend toward building bigger pads, and for all my company’s sites, we try to build 40-foot-wide pads as much as possible. There are times when the unit mix won’t allow this, so if we have to construct buildings 30 feet wide, we will. In general, though, using bigger pads means fewer buildings, aprons (the stepdown in concrete around the building), bollards and driveways. All of these items are significantly more expensive on a per-item and per-square-foot basis than concrete.
Let’s use another example. If I build 39,600 square feet across six 30-by-220 buildings and seven driveways vs. 40,000 square feet of self-storage across five 40-by-200 buildings with six driveways, my cost to build is significantly higher, even though it yields fewer rentable square feet. To do six buildings, I’d have to add four bollards, an additional 600 linear feet of apron around the perimeter and an additional 10,200 square feet of driveway.
When you add all that additional cost together, it just makes sense to go with fewer buildings and fewer driveways. Now, bigger buildings could also mean more difficulty with drainage, so that must be considered. Still, when possible, bigger buildings are cheaper in all aspects.
3. Have a Plan for the Timber
One reason I like to develop self-storage sites of at least 10 acres is because I can usually get a local company to pay me for the wood on the property. They remove the tree stems, chip them and leave only the stumps. Developing only a few acres normally doesn’t yield enough to get paid for the wood because of the cost to land the equipment. In those cases, you usually end up having to pay someone to clear all the trees.
Another option—and this only applies to more rural communities—is to burn the wood on site, which requires a permit. Not having to transport the wood means less trucks and heavy equipment, and you’re pretty much paying one person to watch the wood burn overnight.
The last option, which is a bit tricker because of drainage and ordinances, is to excavate a ditch. This is ideal if you need dirt or sand and can get it on site. Fill in the ditch with the trees and cover it, or use the trees to help form a berm (flat elevated strip of land), which can also serve as a sound barrier. I like this option simply because it reduces the carbon footprint. The easiest way to do it is to ask your site engineer and excavator if they have any ideas to balance the site and use the trees so they don’t have to be transported off site.
Too often, I see developers just clear the portion of the land on which they’re building. Clearing all the land at once saves a lot of money in the long run and avoids pest problems. If you decide to expand your self-storage facility, having cleared all the land ahead of time will also allow you to segue into the project easily and quickly.
4. Consider Your Materials Carefully
It always amazes me how much material prices range from market to market, whether it’s steel, asphalt, gravel or sand. Right now, the standard for most self-storage facilities is asphalt, but it’s widely agreed that concrete is a better long-term option for quality and longevity.
When using asphalt, we normally go with a 2.5-inch base coat, which provides a few years of use before areas begin to settle and a second layer needs to be applied. Recently, concrete prices haven’t increased as much as other materials, so we’ve been going that direction. Though it’s more expensive on the surface, it also requires less aggregate than asphalt. Thus, while you pay more for concrete, you also pay less on the crushed concrete that goes underneath it.
I also prefer using all concrete because it’s one fewer contractor I have to coordinate. I often can lower my cost by 25% to 40% on a price-per-square-foot basis because the job size allows me to apply more economies of scale. While gravel driveways are the cheapest option (by far) and can sometimes be optimal for drainage, we typically don’t consider it for our facilities.
5. Use Flood Lights That Spray Outward
If ordinances allow, purchase lights that spray outward or are open because they provide significantly better coverage of the facility. Not only does this mean fewer fixtures, your self-storage tenants feel safer, and you don’t have to go as bright. The problem is many cities have ordinances that require the fixtures be covered or directed downward, which forces more fixtures because it lessens your coverage.
We once bought a facility where getting electrical to one of the buildings was going to be significantly expensive. By using lighting on adjacent structures that sprayed outward, the building was adequately lit.
In cases where this strategy isn’t allowed and requires a variance, we often can get the municipalities to agree to allow us to use outward-spraying lights in the middle of the facility as long as downward lighting is used on the outside or for units that are close to the perimeter. This minimizes the amount of light pollution to surrounding parcels. The fewer lights you have to use to get adequate coverage will also help you save on your utility bills.
6. Use Local Vendors
It may shock people to hear this, but we shop multiple vendors on every deal, even if we’ve had great experiences using certain companies multiple times. Suppliers sometimes vary their pricing by as much as 30% to 40% just a few months apart, so we’ve occasionally used different vendors throughout the year, especially when it comes to steel.
Property location and multiple sites can also drive up pricing. In a situation in which we had two sites about three and half hours apart, my same suppliers had to add 15% to 20% to their costs just to account for the additional site and amount of travel between locations. Similarly, some steel companies will quote labor that has to travel from another state and stay in a hotel. If you shop for your own labor locally, you can sometimes save as much as 40%.
Cheapest Isn’t Best
Though we’ve covered several ways to cut costs on self-storage development in this article, that doesn’t mean you should look for the cheapest possible avenue. Though less expensive, an unproven vendor isn’t something we’d risk when building multi-million-dollar facilities. Question any quote that’s significantly cheaper than the competition. If you pay for quality, customers will follow.
Charlie Kao is the principal of Twin Oaks Capital, a Michigan-based commercial real estate company specializing in self-storage and multi-family assets. Services include real estate brokerage, asset management, feasibility studies, consulting and building-construction management. The company and its affiliates have owned, operated or planned more than 1 million square feet of self-storage. Charlie also owns House of Kaos Real Estate School, which provides continuing education credits for licensed realtors. He can be reached at [email protected].