THE BENEFITS OF INVESTING IN STEEL SELF-STORAGE FACILITIES

The late George Carlin had a riff on Americans and their stuff. We buy a house and fill it up with stuff. When we can't fit in any more stuff, we buy a bigger house where we proceed to fill it up with even more stuff.

Eventually, if we keep following this logic, everyone would be living in a warehouse, but that isn’t very desirable for most folks. However, we still have all this stuff and nowhere to put it, right? This is where the metal self-storage unit comes in and why the popularity of these facilities continues to grow apace.

The best and most cost-effective facilities are built with steel.

INTERESTED IN BUILDING A SELF-STORAGE FACILITY?   LEARN ABOUT THE OPTIONS AVAILABLE THROUGH STURDI-STORAGE »
WHAT, EXACTLY, IS STEEL SELF-STORAGE?
Simply put, steel self-storage is a building separated into multiple individual storage units, similar to garages and sheds. Most have no utilities (electricity, water, heat). If you own one of these facilities, people will pay you to store their stuff on your property.

The original self-storage facility looked like a long row of garage doors linked by unpaved driveways. The whole thing was surrounded by a chain link fence.

Modern self-storage facilities:

Include offices and security gates
Are aesthetically pleasing
Built to match the local environment
Have modern designs and technology
Accommodate the wide array of needs from today’s renter
People rent space to store everything from valuable household items and files to boats, RVs, industrial equipment, and business inventory.

INTERESTING STATISTICS ABOUT SELF-STORAGE IN THE U.S.
There are over 52,500 self-storage facilities in the U.S.
Annual sales average $32.7 billion
5 billion square feet are available across the country
Average size of a primary storage facility is 56,900 square feet, about 7.3 square feet for every individual in America
One in ten households rent self-storage space
68% of renters are homeowners
Of commercial customers, 40% rent for more than two years
The top 100 operators own 18.95% of U.S. facilities; the majority are small independent operators
WHY YOU SHOULD INVEST IN STEEL SELF-STORAGE
Steel self-storage has been a significant growth industry for the past 25 years and shows no signs of letting up. The public awareness of the cost-effectiveness of self-storage continues to drive sales. The return on investment is highly favorable.

Your two major expenses are land and the buildings.

Self-storage facilities can make use of oddly shaped or deeply sloping properties that are not desirable to other industries such as retail. Such properties are often priced to sell as are empty structures such as box stores that have closed for one reason or another.

Closed retail stores come ready made with an office and wide-open spaces, perfect for storage units. Some have loading docks that can be used by storage customers for loading and unloading. Multistory buildings can often be transformed into self-storage as well. The owner is losing money each day that building sits vacant and will typically sell at a low price.

For the construction of new facilities, nothing is more cost-effective than steel. It is a durable, low-maintenance material that is eminently suited for self-storage units. Steel structures have lower insurance costs, are flexibly designed, and easy to erect. They resist fire and pests, so you don’t need to put a large number of restrictions on the type of items placed in storage.

If you have a sloping property, you can build a two-story storage facility into the hill, saving money on climate controlled units and offering extra protection from the elements. If your facility is free-standing, you can easily double your rental space by constructing a second story. Many facilities do not have electricity, plumbing, or gas, which lowers bills considerably. Even if you offer climate controlled facilities, the tenants cannot access the thermostat.

THE BENEFITS FOR FINANCING AND OPERATIONS
Financing for self-storage units is readily available. It is an investment that experiences the fewest defaulted loans among commercial construction projects. The typical loan requires 25% down for conventional financing or 10% with an SBA program.

A performance comparison shows you the difference in failure rates between four common commercial projects.

Multifamily: 58% failure rate
Office: 63% failure rate
Retail: 53% failure rate
Self-storage: 8% failure rate
Of the 8% for self-storage, many were taken back because they were collateral for loans on other real estate, not because of financial troubles with the facility.

Self-storage also has a lower break-even occupancy rate than structures such as multi-family or office space. Other industries require 80% to 90% occupancy for breakeven; self-storage only requires 60% to 72%. Any reduction in tenancy has less impact. When tenants fail to pay the rent, eviction and property auctions are easier to perform than with apartments.

Operations and management costs are also lower. Apartments, offices, and retail require continual maintenance of the grounds, appliances, electrical and plumbing fixtures, and other issues that need a maintenance staff. Self-storage can get by with one or two managers to oversee a series of low maintenance buildings.

Finally, a steel storage buildings need little parking and generate only a small amount of traffic to the neighborhood.

Example financial projection
Using an assumption of 400,000 square feet of net-leasable space with rent at $9.00 per square foot, you could generate as much as $450,000 in gross annual rents at 100% occupancy. Other income can be received from late fees, retail sales of moving accessories, administrative fees, and truck rentals.

If you borrowed $1.59 million at 10% interest, and an amortization rate of 25 years, an investment of $397,615 can realize 29.6% cash-on-cash ROI once you have reached 90% occupancy. Sale of the business in the future could realize a profit of $864,425.

CONSTRUCTION COSTS
The largest variable in development costs is the land. When you are shopping for a site, be wary of land costs below market value as it may translate into greater site development expenditures.

The amount of net-leasable property depends on:

Zoning setbacks
Easements
Utilities
Building-code compliance requirements
Topography
Physical layout of site
Typical site coverage ranges from 35% to 50%.

Construction costs vary according to the amount of site preparation required:

Clearing and grubbing
Excavation
Storm drainage
Utilities
A civil engineer can help mitigate costs in these areas.


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