Self Storage- Building Cost Increases

Just got our latest estimate for our Phase 2 of a location. This is for your normal drive up units. Last fall Phase 1 we were $3,200 erected for 10 x 15 or 10 x 20. This was contracted around February of last year. Latest quote is $4,000 per unit erected.

Steel for buildings, rebar steel and Concrete caused the increase. Erection cost didn't change that much. This is for 7 buildings. About 198 units. About $150,000 increase on the project for the erected buildings.

Still moving ahead, since the project "numbers" only work with the whole site completed. Our builder is actually going to buy the Steel rebar now versus in 3 months, and store. He does other Steel work and thinks both the price and Availability will get out of reach. I agree with him. I think there will be a Choke point on the West coast Cargo Ship ports as the economy plays catchup from last year. Steel will have to battle, staplers, lawn mowers and plastic tubs, to get on a ship and get unloaded and distributed.

This is a solid location from both a Customer and a competition standpoint, so we can take on the additional costs. A weaker location, would have to do some re-calculations.

If you have used historical data on a project you are running the numbers on, you might re-do the figures and challenge them.

************  08 28 2021

Got our latest quote on a new building, phase 3.

Building 30 x 250 roll up doors, drive up access $162,000
Concrete Slab $ 47,000
Erection of Building $26,000

Total $ 235,000

50 units, averaging $ 4,700 per unit

Already own the land, does not include driveways, grading, electric, security, etc.

If you see my first post above, this was $4,000 per unit erected March of this year.

This location needs more storage, but is not a super strong market. Price for a 10 x 15 runs $55 per month.

At $55 per month before taxes and costs, $4,700 at full occupancy at $55 per month would take 85 months or about 7 years. Thus 9 years based on rent up phase. We normally expect to pay these second phases off in about 4 years, including the extra costs except land.

We have 8 locations in 5 different towns. Plus two other non self storage operations we can invest in. Most of the other locations have a higher demand potential and higher rates for the same units. At this time we are deciding not to build these units at this location.

A. Basically priced out of this market. Our multiple location and town approach, however keeps us in the game.

B. We could use 10x20 cargo containers at $3,200 delivered and set. Versus the $4,700 for regular storage. We can add and sell containers as needed. No property tax. Can write off in year 1. About 1/2 of the customers won't rent of like these, since they are harder to open.

C. You might use this information for different purposes. We might decide to take a run at buying other operations.

If an existing place had 150 units, using the brand new cost of $4,700 = $705,000. Using a 3 acre parcel. Land $150,000. Fence $25,000. Gate $25,000. Electric $25,000. Security $25,000. Grading/rock roads= $50,000. Misc $15,000. Total= $1,020,000 brand new.

You would take out the rent up phase. Know the market is there. Take away both the work and the risk of developing. Easier to finance, since already cash flowing. Need to find a place where 10 x 15's are $70 or higher. You would offer around $700,000 in that market and start from there. You get cash flow for the time you hold it. As long as you maintain it, you sell for the same unadjusted inflation price 10 years later.

"Start small and Make Your Big Mistakes Early." You will still get Whacked sometimes even when you have learned a lot, but you can absorb it, when your bigger.