Inside Self-Storage

JUN 2019

Inside Self-Storage (ISS) is an information source for industry owners, managers, developers and investors covering news, trends, facility operation, finance, real estate, construction, development, marketing, technology, insurance and legality.

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T hings have changed in the world of self-storage construction. As an owner/developer, you need to rethink your timeline and budget. Many general contractors and metal-building suppliers have simply taken on too many projects at once. They've stretched their resources beyond their competency and capacity. The formerly six- to nine-month project will now take closer to 12 to 18 months. In addition, the cost of building in today's market has increased substantially over the past five years. Single- and multi-level expenses are up 30 percent to 50 percent. You can point your finger at prices for raw materials like steel or a tight labor market, but also realize that interest-rate increases and other "hidden" costs such as new building codes are playing a part. Following are some factors to watch and be prepared for during the construction of your next self-storage project. Your Timeline Most self-storage general contractors will provide you with a Gantt chart to show the timing of each phase of the construction process, from beginning to completion. A Gantt is a type of bar chart that shows the relationship between various activities and the schedule. It's important to review this at the beginning of your project to ensure the timeframe is reasonable and various tasks are in proper order. You should also monitor the construction schedule and be alert for any delays. There are several problems to avoid when developing self-storage. Unfortunately, some things, such as weather, will be out of your control. Extensive periods of extreme wet or cold can affect the timing of critical-path items. Pay attention to extensive delays, and make sure the general contractor is working to adjust task completion and stay on schedule. Anytime issues interrupt project progress, try to recalibrate the Gantt chart. This is important, especially so you can inform your bank or investors of potential delays. You wouldn't want to start your project and run short on cash halfway through. This would force you to go back to your lender and ask for more funds, and that conversation won't go well. Your Budget Once you've selected a good development site, which assumes you've made it through the design, engineering, zoning and bank-approval processes, the project typically begins with a focus on the construction budget provided by your general contractor. Last year, we completed a 65,000-square-foot, single-level self-storage facility with 45 percent climate-controlled units. The accompanying table shows our planned and actual costs for the project. Note the numbers are based on net rentable square footage. The total floor area, including the office, is 75,000 square feet, with hallways and the office eating up 10,000 square feet. The old Boy Scouts of America motto, "Be prepared," applies to self-storage construction budgeting. The first rule is to check your costs and make sure you have an additional 10 percent to 15 percent in funding to cover unexpected items. Fluctuating steel prices, labor costs and other unforeseen expenses, such as site work, can escalate even when you have a solid contract. While some subcontractors provide reliable fixed costs throughout the process, others might not be willing or able to do so. Rethinking Your Construction Timeline and Budget A realistic view of building in today's environment By Jefrey B. Turnbull and Lucas J. Turnbull Item Planned Cost Per Square Foot Actual Cost Per Square Foot Site work/stone/paving $18.00 $20.03 Metal buildings $17.00 $18.42 Electric/HVAC/other $5.00 $5.40 Concrete slabs $8.00 $9.00 Soft costs (architecture, engineering, bank and legal fees) $2.00 $2.16 Landscaping/fence/gate/cameras/upft $3.00 $3.45 Total $53.00 $58.46 34 ISS I June 2019 www.insideselfstorage.com

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