If you are contemplating building a self-storage facility from the ground up, then this article is for you. This is a much different approach than buying an existing facility. When you start down this path, there is a general process to be considered and understanding this will allow you to plan accordingly. Before we jump into those details, let’s look at a few reasons “why” somebody would want to build vs. acquire.
Once the decision to build has been determined, what’s next? There are some key next steps to understand that are impactful when basically starting from scratch.
1. Land Acquisition: This is probably one of the bigger considerations during this process and there are many aspects that need to line up “just so” to minimize the risk. Below are some questions to answer before closing on a property. All these questions will impact either time, cost, or even if you can build on the property.
2. Market Feasibility Study (MFS): This can sometimes be a cost that investors, developers, or owners want to skip. They believe they know exactly what is needed in a market and they are going to go off the understanding as they see. However, there is an increased risk by skipping the MFS. If you find a good consultant, there is a lot of information in the MFS that can be used during the underwriting process of obtaining financing. A lender is going to want the data that supports why the project has low risk and high return. Therefore, either you are doing this on your own or you work with a 3rd party and have a nice report created for your use.
3. Site Layout: During the Due Diligence process of closing on a property, creating a site layout is going to give a visual representation of how many units you are going to be able to build on the site. This is absolutely key in creating a proforma and/or a forecast of Net Operating Income (NOI). Before a Site Layout can be done, you must have a general idea of the unit mix and general Net Rentable Square Footage (NRSF) you are targeting. This information should be provided in a Market Feasibility Study. Regardless of whether a study is complete, this information needs to be provided to the site layout designer.
4. Construction Docs: Once the decision to move forward on building the facility Construction Documents (Drawings) need to be created. These will comprise of the following: Architectural Drawings (including MEPs), Civil Drawings, and Structural Drawings.
5. Design Approval: Many municipalities are going to require a “Design Approval”. This part of the process can be taking place simultaneously with the creation of the Construction Documents. The Architect will manage this process with the Planning & Zoning Department of the Authority having Jurisdiction.
6. Estimates: When the construction documents are 75-80% complete a General Contractor can begin obtaining estimates from all the trades to complete the project. The complexity of the project will often determine if there is a General Contractor or if the owner manages the construction themselves. Either way, these are some of the trades that will be involved in the build.
7. Contracts: After estimates have been obtained, each trade will go into contract with either the owner or the General Contractor. It is critical to know what is and is not included in the scope of work. A few items to take into consideration are as follows: liquidated damages, indemnity clauses, price guarantees, buyer obligations, and warranty info. When in doubt obtain legal consultation.
8. Build it: The General Contractor (or owner) will manage the project and all the trades. This includes getting material ordered and to the jobsite, permitting as required, scheduling the work, and dealing with any issues that arise during the construction process.
The above information is for general reference purposes only. Please note that depending on the project there could be more or fewer steps to the process. Some developers, investors, and owners want to jump right into getting estimates during the due diligence period of closing on a property. This is understandable because they want to know if they are going to be profitable in the venture. Rough budgets can be gathered, but know that these are very rough and are subject to change once the final construction documents have been completed.
Here at Forge Building Company, we can provide a proposal, using Forge Standard Build Package, after the site layout has been approved. Although we are a substantial part of the construction team there are other’s costs to be considered. Our bids include not only the materials and labor to erect, but we also provide the Structural Drawings for the foundation(s) and building(s). As discussed above, the Structural Drawings are a part of the Construction Documents that are most often required for permitting.
Deciding to build your own Self-Storage Property from the ground up is definitely an adventure, but you don’t have to go it alone. A key to having a successful project is to put together a great team of experts. Forge Building Company are experts in building self-storage, as we’ve built over 60 million SF of self-storage over the last 15 years. We’d be delighted to be a part of the team that is building your next investment.
Melissa Anderson has over 20 years of experience in the Construction Industry and provides insight to those ready to build their brand-new self-storage facility or expand an existing one. With an astute understanding of the self-storage industry, she assists both the seasoned investor, as well as those who are just beginning their journey with the construction of their self-storage project. For more information, reach out to her at firstname.lastname@example.org or at 208-629-2952.