Storage Units: How much is too much for the dirt?

Question

Here's a question for developers and brokers - how much is the average price/ft for storage units?

Scott Meyers · Answer

Hey Brent!

Your answer is "it depends", as that's my stock answer for most things.  But, my intention is not to say something humorous and then not answer, but see if I can help you determine that.  Because even your simple question has got quite a few variables that are hard to pin down and give you an exact number.

For existing Facilities there's really only two ways to value them: 1) the real estate appraisal &  2) the income valuation.

We believe that you are buying a secured income stream backed up by real estate so we prefer the latter method of determining a Facility's worth.

Take the NOI (Income minus expenses) and divide by the Cap Rate and that will give you the Value of the Facility.  As the NOI is objective (it is what it is, look at the P&L) and the Cap Rate is subjective, typically the lower the Class (A, B, C, or D) then higher the expected Cap Rate.  (The higher the cap rate and the lower the value & vice versa.)

Then you can divide the Value by the # of Units and get the $/Unit Cost or by Sq Ft and get the $/Sq Ft Cost.

And as the typical "market" for a Facility is 3-miles, it is very hard to give an "average" that will encompass everything.  You're going to have to get more area-specific.

In regards to Development, there's more variables.  As there is no income stream, you'll literally have to put together the costs, but not just the cost of "building" the individual units but developing the actual Facility itself, e.g. Land & Grading; Cost to build (is it single story, multi story, climate controlled?  Are you including the paving, fencing, lighting, etc.? ); soft costs (architecture, engineering, fees, etc.); working capital, & so forth.

And then you divide again by the total Sq ft and/or Units for the respective number.

So as you can see, there's a few more considerations than just giving a "flat rate".  If & when you start to drill down and have some more specificity, I'd be happy to help.

Also, please note that I usually advise folks to focus on a geographic area and look to buy an existing Facility.  If you look at enough in a particular area, you'll get a good idea as to what the going rate ($/Sq Ft) is per Facility Class.  And if you can't find one to buy and the market is conducive (that's a whole nother conversation) then perhaps it will make more sense to build than to buy.

At which point you can do some "back of the napkin" cost estimating for development and use this numbers ($/Sq Ft) to compare against the going rate of existing Facilities.

I hope this makes sense and helps.  Please let me know if I can be of any assistance.

And best of luck to you!

Jay Hinrichs · Answer

@Scott Meyers  has a storage academy  that's the one I went to in Vegas this year.. lots of good info there..

I would make contact .. your probably on the advanced ( well not probably you are ) advanced side on the development end so it would just be running the numbers.

what I saw scott teach though was hiring a consultant for market study in that study will probably answer your questions and you will need it most likely for your debt financing unless your paying cash.

Brent Shryock · Answer

Don’t know if this would help, but I just looked up an appraisal on a loan we did on a multi story  421 unit climate controlled storage facility in GA.

The land cost (really appraised value, owner owned the land for long long time) was 17% of the hard/soft costs.

Jay Hinrichs · Answer

PS you know Joe Rainey ?

also have you looked at Hangers ??  same concept instead of story stuff.

you store your airplane.. I have just started to delve into that one  I bought a hanger condo and that worked well.

but I think there could be a play in those and less competition.  just pre memorial day musing.. not to throw the thread off track :)

Greg Dickerson · Answer

It’s all about the return your looking for. You can pay as much as it takes as long as the deal still works.

It all depends on location, rents and type of product but I like to be no more than 20-25% of total cost. I don’t really use the sqft formula I look at the overal cost ratio for all my projects including residential.

Some people may pay more but I am very conservative

Jay Hinrichs · Answer

I went to a storage seminar which was quite good.

a lot of what I saw was existing facilites were they could add on ..

did not see a lot of ground up..  I think though you just work it backwards.

what is rent per sq ft.. price to build leaves U residual for the land..

I know that's pretty simple answer .. but rates for storage vary wildly by location

Jay Hinrichs · Answer

well since its your thread we can talk a little aviation :)   Joe bought a Cirrus same year I bought mine.. at that time he commuted to SLC but put something like 400 hours on it first year which is right up there with commercial pilots.. he then bought a TBM.. 700 .. then like all of us in the business 08 happened not sure if he sold or what.. but we all kind of retrenched..  and then yes he bought the mustang he had a deposit on the Honda jet. but I think at 4 or 5 mil he probably went for the smaller one.

Anyway yes you could do a lot with a decent all weather aircraft.. lots of tough weather between St. George and Boise as you know.

You could do it in a plane like mine a Cirrus but  U would have to really watch weather and such.

a pressurized turbine is what you would want you can get a decent used one for 1 to 1.5 mil.. and if you really use it they are good write offs and of course hard to value our time.. you could now make your meetings and be back for dinner.   And with a son as a pilot you have a big advantage.   I suspect he could help U immensely in picking the right machine for your mission etc..

best of luck

Storage Units: How much is too much for the dirt?

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