Things have changed in the world of self-storage construction. As an owner/developer, you need to rethink your timeline and budget. Many general contractors and metal-building suppliers have simply taken on too many projects at once. They’ve stretched their resources beyond their competency and capacity. The formerly six- to nine-month project will now take closer to 12 to 18 months.
In addition, the cost of building in today’s market has increased substantially over the past five years. Single- and multi-level expenses are up 30 percent to 50 percent. You can point your finger at prices for raw materials like steel or a tight labor market, but also realize that interest-rate increases and other “hidden” costs such as new building codes are playing a part.
Following are some factors to watch and be prepared for during the construction of your next self-storage project.
Most self-storage general contractors will provide you with a Gantt chart to show the timing of each phase of the construction process, from beginning to completion. A Gantt is a type of bar chart that shows the relationship between various activities and the schedule. It’s important to review this at the beginning of your project to ensure the timeframe is reasonable and various tasks are in proper order.
You should also monitor the construction schedule and be alert for any delays. There are several problems to avoid when developing self-storage. Unfortunately, some things, such as weather, will be out of your control. Extensive periods of extreme wet or cold can affect the timing of critical-path items. Pay attention to extensive delays, and make sure the general contractor is working to adjust task completion and stay on schedule.
Anytime issues interrupt project progress, try to recalibrate the Gantt chart. This is important, especially so you can inform your bank or investors of potential delays. You wouldn’t want to start your project and run short on cash halfway through. This would force you to go back to your lender and ask for more funds, and that conversation won’t go well.
Once you’ve selected a good development site, which assumes you’ve made it through the design, engineering, zoning and bank-approval processes, the project typically begins with a focus on the construction budget provided by your general contractor. Last year, we completed a 65,000-square-foot, single-level self-storage facility with 45 percent climate-controlled units. The accompanying table shows our planned and actual costs for the project.
Note the numbers are based on net rentable square footage. The total floor area, including the office, is 75,000 square feet, with hallways and the office eating up 10,000 square feet.
The old Boy Scouts of America motto, “Be prepared,” applies to self-storage construction budgeting. The first rule is to check your costs and make sure you have an additional 10 percent to 15 percent in funding to cover unexpected items. Fluctuating steel prices, labor costs and other unforeseen expenses, such as site work, can escalate even when you have a solid contract. While some subcontractors provide reliable fixed costs throughout the process, others might not be willing or able to do so.
For example, site-work costs might change due to soil conditions or weather-related problems. These big-ticket costs may swing about 30 percent or more from the time you signed the contract with your general contractor to the moment of project completion. Metal-building suppliers can’t simply offer fixed prices for their components if steel prices jump. These fluctuations can add as much as 15 percent to the total cost.
The takeaway is to simply be prepared for any unforeseen cost adjustments. This is especially true during periods of high demand for construction material and labor.
When building self-storage, it’s best to remember that it’ll cost more and take longer than you’d like. For our most recent project, we added 10 percent to the final per-square-foot cost. Also, add roughly six months to the original timeline.
Cost and time overruns are becoming common in the self-storage building process. It’s vital to monitor the situation to keep it from spiraling out of control and negatively impacting your project.
Jeffrey B. Turnbull is president of Kodiak Mini Storage II LLC. He’s been involved in the self-storage business as a developer, operator and owner for more than 20 years, and is currently developing a new store in Charlotte, N.C. He’s a licensed attorney in North Carolina, a licensed real estate broker in North and South Carolina, and a past president of the North Carolina Self Storage Association. He’s a regular contributor to “Inside Self-Storage,” and a speaker at various industry events. To reach him, e-mail [email protected].
Lucas J. Turnbull is a former project manager for Kodiak Mini Storage II LLC. He helped manage the construction of a new 65,000-net-rentable-square-foot facility in Charlotte, N.C. A graduate of Clemson University, he’s a licensed real estate broker in North Carolina. He’s now a commercial real estate broker at Gambrell Real Estate Consulting LLC. To reach him, e-mail [email protected].