“How much will it cost?” Without fail, this is the most common question self-storage owners and developers ask when considering whether to build a new facility. Though it’s simple to ask, it’s much harder to answer. The process of assembling an accurate development and construction budget and price involves weighing a lot of factors.
Understanding Cost Influencers
The first thing to do is to examine the high-level items that can dramatically influence the cost of any given project. These can be organized into a few primary buckets:
Target market. Where are you going to build? Costs can fluctuate widely from area to area depending on labor force, union presence, availability of raw materials, etc. Something that costs $X in Dallas may fetch a 25 percent premium in Seattle.
Site-specific challenges. Once you’ve chosen a market and are examining individual land parcels, think about site-specific issues such as:
- What kind of soils exist on the site?
- Is there rock?
- Is groundwater present?
- Will you have to import or export dirt?
- Will you have to build retaining walls?
- How will you deal with storm water?
- Are there any environmental issues?
There may also be site-specific design requirements. Some big ones to consider are seismic and high-wind or hurricane conditions. Also, what’s the snow load? It’s important to consider the climate zone and how that will that impact the building envelop. The answers to all of these issues will impact project cost.
Building size and shape. This will certainly impact your budget. The larger the building, the greater your economies of scale. The number of stories will impact structure type, fire requirements and more. The land may also dictate that the building be an inefficient shape (think about a ratio of façade wall to floor area). Additionally, the proximity of the building to lot lines will have building-code implications that impact cost.
Municipality- or owner-driven specifications. Are there any conditions that will be driven by the local municipality or even by you as the owner? Will the façade be stone or metal panel? How much glass will be on the exterior? Are there landscaping requirements above and beyond the norm? Office specs, hallway systems, average unit size and number of elevators should also be evaluated.
Building Your Budget
Once you’ve evaluated all the major cost influencers, you can start assembling an actual budget. For all the reasons previously stated and to avoid common mistakes, avoid using universal costs per square foot. No two projects are exactly alike. Make sure you account for unforeseen contingency or tax issues, and consider all of the possible scope gaps, such as signage, impact fees and low voltage.
I recommend you work with a general contractor to create your budget. A price can be based on whatever information you’re able to provide. You might only know the region, plus the total square footage and number of stories you want to build. Or, you might know much more, such as site plan, elevations, floor plans, geotechnical report and a survey. The more information you’ve gathered, analyzed and shared, the more accurate your budget will be.
Getting to the Construction Price
Once you’ve created a solid budget and determined the project still makes sense, it’s time to get a firm price for design and construction. First, you’ll need to decide on the project-delivery method, and there are two widely used ones to consider:
Traditional plan-and-spec. This process requires the developer to hold separate contracts for each design consultant and contractor. This can exacerbate the opposing goals of your development-team members, increasing the risk of delay and increased costs. The owner often gets caught in the crossfire between designer and contractor for drawing errors and coordination issues.
Design-build. In this method, you work with an integrated team, bound by a single contract, to get turnkey design and construction services. Because you deal with just one entity from concept to completion, this method can provide faster delivery timelines, reduced risk, lower overall cost and decreased burden to ownership. It also eliminates any finger-pointing between the contractor and design team.
The table below shows what plan-and-spec and design-build contractors need to provide a hard price for your project.
Under a design-build contract, an owner can get a firm project price before spending significantly on design and construction documents. Usually, the items needed for an entitlement package are all the contractor needs. The company will take that information and connect the dots by completing the conceptual design inhouse. Savvy developers will work feasibility, site planning and design-build pricing into their land-option period to create a clear picture of total project cost before committing major dollars on a property.
In a design-build project, cost risk is limited to truly unforeseen conditions and the scope changes originated by the owner or municipality. The builder holds itself accountable to the performance specifications in the contract, eliminating change orders from design or code issues.
Whatever project-delivery method you choose, it’s best to involve your contractor early in the process. To establish to a firm price, the company will need a thorough understanding of every project variable.
If you’ve solicited quotes from multiple contractors, make sure you’re getting an apples-to-apples comparison. Has everything been accounted for in each quote, and are the contenders including the same scope of project? This is the final step to ensure you’re ready to choose a contractor and break ground!
“How much will it cost?” As we’ve seen, the answer is never as simple as the question. Take time to consider each step, and you’ll find yourself breaking ground with a much clearer picture of total project expenses.
Eric Fleps oversees business development for ARCO/Murray Design Build in Dallas, which has more than 25 years of experience. With a background in engineering and project management, he brings a unique understanding and perspective that allows him to guide clients through the development process and foster strategic partnerships nationwide. He’s skilled in cost control, design, and project and sales management. For more information call 214.377.6681; visit www.arcomurray.com.