Estimated Costs to Build Self Storage Facility
Attorney · Houston, TX · Member since 2016 · 61 posts · 38 votes
My family owns about 3 acres in a semi-rural part of Montgomery County, Texas. We recently found out that the new "Aggie Super Highway" from Houston to College Station will have frontage on our property. So we have been considering building a self storage facility on the lot in anticipation of the future growth. Aside from market considerations, I have a few questions:
-How many rentable square feet can I reasonably fit onto 3 acres? About how many units?
-What is the estimated cost to build a decent facility in that part of Texas (cost per s.f. or similar)?
-What is a reasonable profit margin per unit per month (or something similar) to expect for self storage units?
Keep in mind we already own the land, but there's nothing on it. We'd be starting from scratch, and we would want to use a management company. This would be for stable cashflow. I know self storage is all the rage right now, but I haven't seen much on new construction of storage. Thanks in advance for any guidance!
Here's couple quick responses:
How many rentable square feet can I reasonably fit onto 3 acres? About how many units? Approximately 15K square feet per acre, so 45K total on the 3 acre plot. Number of units will of course depend on what unit mix you go with but in most markets an appropriate unit mix will result in somewhere between 80 and 120 square foot per unit.
-What is the estimated cost to build a decent facility in that part of Texas (cost per s.f. or similar)? Roughly $30-35 per square foot all in (exclusive of land). This would include site prep, fence, basic electric, cameras and a simple office along with the buildings.
-What is a reasonable profit margin per unit per month (or something similar) to expect for self storage units? This one is tougher to answer as it will be so market dependent. That said, here's a couple rules of thumb that might help. You'll need to check out the competition in the area and see what they are charging per square foot per month. Do the math to get to a GROSS potential rent. Lets say your 45K facility can be supported by demand in the area and will generate $30K in revenue at full capacity. That's $360K in max revenue. Roughly 1/3 of that will go to operating expenses so you will have an NOI of $240K left over to pay your debt service and line your pockets:) Hope that helps some.
You might find some value in this little blog that I post here on BP:
https://www.biggerpockets.com/member-blogs/3915-all-things-self-storage
Here's couple quick responses:
How many rentable square feet can I reasonably fit onto 3 acres? About how many units? Approximately 15K square feet per acre, so 45K total on the 3 acre plot. Number of units will of course depend on what unit mix you go with but in most markets an appropriate unit mix will result in somewhere between 80 and 120 square foot per unit.
-What is the estimated cost to build a decent facility in that part of Texas (cost per s.f. or similar)? Roughly $30-35 per square foot all in (exclusive of land). This would include site prep, fence, basic electric, cameras and a simple office along with the buildings.
-What is a reasonable profit margin per unit per month (or something similar) to expect for self storage units? This one is tougher to answer as it will be so market dependent. That said, here's a couple rules of thumb that might help. You'll need to check out the competition in the area and see what they are charging per square foot per month. Do the math to get to a GROSS potential rent. Lets say your 45K facility can be supported by demand in the area and will generate $30K in revenue at full capacity. That's $360K in max revenue. Roughly 1/3 of that will go to operating expenses so you will have an NOI of $240K left over to pay your debt service and line your pockets:) Hope that helps some.
You might find some value in this little blog that I post here on BP:
https://www.biggerpockets.com/member-blogs/3915-all-things-self-storage
I think there a few factors. Will it be climated controlled? Will be it single story across the property? Or will you build it up 2-3 stories? Being that it is in a semi-rural area and this new highway isn't there yet, I would do a feasibility study.
Kyle,
Sometimes the worst reason that people build a facility is that they already own the land. Self-storage has gotten a lot of press in the last few years and for good reason. The first thing to do is to get a feasibility study. If you are going to get a loan to build it, the bank should require one...we do for many reasons.
The costs of building the facility can vary greatly. your local zoning and permitting can tell you how many sf can fit on a piece of land and it will depend on your FAR (floor area ratio). a good rule of thumb is 15-17,000 sf per acre assuming that all of it is buildable. In your part of the country, there are quite often issues with the plasticity of the soils which will require much more substantial amounts of concrete for footer and foundations. I remember a project in Bryan that required hundreds of pilings driven down to the solid ground, so this is a factor that alters a 'normal price'.
What we have been seeing is for a decent facility that has a mix of climate-controlled units, fence, gate, keypad, paved drives, etc. is going to be in the mid $40-low 50 per sf. this is for a single story project. I am a partner on a single story with CC that we just recently got our costs on and it was in the low $60's per sf. If you go multi-story, it will be higher (no pun intended) but I doubt that you will be doing that said it is semi-rural. I am a partner in a large multistory that we opened this year and it was in the $80+ range. Just remember that the costs can vary wildly depending on some things that are out of your control and some things that are, such as average unit size (smaller the average size, the more expensive...your feasibility study will tell you what the unit mix should be) and how nice you make it to attract customer.s If you are the only one in the game, you may be able to get away with cutting corners, but when you aren't the only game in town anymore, you may be behind the 8 ball.
Your feasibility study will tell you what margins to expect, but the more you can lower expenses, obviously the better that they will be. One of the things to consider would be using Virtual Management. I can share some info with you on that if you are interested. it is different than other things out there. I have been in this industry for 25 years and I believe it is going to be the next big thing in our industry.
I have been involved in well over 100 million sf of new self-storage construction and will be happy to share any info that I can that I have learned over the years.
If you are serious about getting into self-storage, you may find that there are better areas to build and that you sell the land that you have now to build in a better/more logical location. Just food for thought!
you can check out our self-storage Knowledge Bank here:
https://www.liveoakbank.com/self-storage-loans/
There is a ton of useful info on there that you might enjoy and benefit from.
Terry Campbell hits the nail on the head wit the feasibility study and the many "gotchas" that can creep up. There's another one, too: What is the expected time before the highway project is completed? You could literally be years in the making and if the population density is still low (which it may very well be) you could be building the best self storage facility no one will see. I'd be very inclined to hold on to the real estate, do my research, my feasibility study, and adopt a "wait and see" attitude about this project before I broke ground. If you look at the exceptional growth in housing markets like Denver, for example, or even longer term growth areas like Atlanta, the customers want facilities within 5 miles of the house. I'm not sure you can easily predict that in this case with the information available.
When everyone says $30-$35 per sq. ft to build storage does that include concrete and labor needed to construct the buildings?
@Kyle Bryant
@Henry Clark bless us with knowledge
Costs about $3,100 per traditional storage unit. This about $15 to $20 per sq foot. This is for the entire building structure erected. Does not include land, site prep, roads, fence, etc
Are you still studying site or have you built? If still studying let me know town or road location and I will take a look at potential. Happy thanksgiving. Getting ready to go golf after 25 years with my brothers hope I don’t tear a muscle. I’ll check if you responded later.
Happy thanksgiving
Down near San Antonio. La Vernia. Enjoying the weather down here. Anyone looking for a development project down here. Give me a yell. Can’t turn your brain of when your driving, looking for projects. Will be about a $1.5mm Storage project with another $2nm potential housing development.