How to Develop a Self Storage Facility From Scratch
Manage episode 333044072 series 2557320
What are the steps you should take to develop a self storage facility from the ground up? Skyler Hartman, CEO of Capitaline Ventures will generously share his knowledge with us.
You can read this entire interview here: bit.ly/3bEbUya
Let's go over the process of developing a self storage facility from the ground up, you can start from the decision on where to find the land, all the way to the beginning of construction, and everything in between.
I like to look in my backyard first because I know the the economics of my surrounding area better than anywhere else in the country, there's less research needed, but that does give you a limited scope. I would always start with the economic analysis and verify that the city or town is growing, that there are good jobs, schools are adequate and getting good ratings, I don't want to be in a war zone. Wether storage may perform great in a war zone, that's just not the place I want to be. So I start with an economic analysis and a little bit of city due diligence, I find out what the zoning process is, is it a conditional use permit? Does it fit into commercial general? Is there any overlay districts that may allow storage that I'm not seeing? Or is it strictly light industrial? Know your zoning, and your economic analysis.
From there, I do some competition analysis, basically mystery shopping. I have a basic spreadsheet with unit sizes prices, I'll shop online first and try to pinpoint their occupancy rates. And you can see that on some sites have "not available" or "call for availability". And you'll see the other units that are available as "rent now". Some REITs like U-haul won't even publish prices if they don't have units available. So you can really drill down on your competition quickly. And from the online search, I'll then do a phone call and evaluate the customer service. Did they answer the phone? If not, did they call me back? Were they polite? Were they professional?
Moving on to finding contractors and doing land surveys, let's say someone is brand new to all of this lingo, what do they need to look for? What do they need to get? And how would they even figure out if a contractor is good for self storage or not?
I would interview at least five general contractors, and I'd prefer a design build contractor. They will help me through any of my processes that I get hung up on, and the entitlement process if needed. We're really good at that in our company, nut sometimes there are some issues that we don't see or it's an area that we're not familiar with, such as California, we have a project going there right now, which I probably won't do another one there. With that being said, design build firms are excellent in walking you through the entire process, as well as optimizing your design from the start. Typically, you'll get a cost plus bid from a GC or that's what we want to see, a cost plus. What that means is whatever the build cost, if it's $5 million, the builder will then put their price on top of that, which is typically six, eight, or 10%. Depending on how much business you do with the firm, you'll get a different pricing plan. The benefit there is if they bid the project at $5 million, it's an open book project, we come in at $4.5 million, that $500,000 in savings goes right back to us, which is excellent.
How long would a project take from beginning to end?
Let's say it's a 100,000 square feet of net rentable, depending on the city process, you could go from start to finish in 12 to 14 months. Six months in design and six months in the build process.