The storage unit sector performs well, and many investors want to get into this business and have a piece of the cake.
Investors can either buy an existing storage unit or build a new one. Investors who choose to build must understand how much it costs to build a storage unit. Unfortunately, the answer to this question is complex, as the cost of building a storage unit depends on several factors.
One of the highest costs when starting a business is land cost. You will only be able to use approximately 45% of the land acquired for the storage units. The net land cost is approximately $6.82 per leasable square foot, covering 25 - 30% of total development costs.
Note that the net-leasable square footage will depend on the proper site coverage. Additionally, development costs may be higher depending on the geographical location of the land. Ultimately, your price will depend on rental prices for similar facilities in the area.
Understanding the direct and indirect costs will help you create a realistic budget, plan, and seek enough capital. As an investor, you must estimate all the critical costs, such as land, construction, material, labor, marketing, and operating costs.
As you research the cost of building a storage unit, you will realize there is no one-size-fits-all answer. You will find that the cost of building your storage facility will depend on the variables and your needs.
You must consider location, zoning, design, restrictions, site improvements, and the number of self-storage units you want while estimating your development costs.
For example, if you are building a 60,000-square-foot storage unit at $40 per square foot, you will need a capital of at least $2.4 million. This number does not include site improvement costs like landscaping, parking, and signage.
Site development costs typically range between $4.25 and $8 per sq. ft. You may need an additional $255,000 - $480,000 depending on where you land.
Development costs will be even higher if you plan to build a climate-controlled facility, but you can charge a higher rent and make up for the additional expense.
Consider the cost of your design as architectural details and finishes can further drive the cost.
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Types of storage facilities
There are four main storage facilities: warehouse storage, container storage, lock-up garages, and removal depositories. Warehouse storage is typically modern and purpose-built.
Big self-storage companies typically offer warehouse storage facilities. They can include tens of thousands of individual storage units ranging in size. They may feature climate-controlled units and 24-hour access.
Container storage units are metal shipping containers parked and arranged behind a secure perimeter. They offer up to 160 square feet of storage space but are sometimes split into smaller units. They are much cheaper to develop than warehouse storage units.
Lock-up garages are purpose-built garages used as storage units. They are usually small, offering about 124 sq. ft of storage space. They are cheap to build and common in residential areas. The security depends on the quality of the garage doors.
Removal depositories are built for removal companies to store clients’ belongings between moves. They are typically located in suburban areas and feature controlled conditions and high security.
To accurately estimate the cost of building a storage unit, you will need to decide if you are building a single-story or multi-story storage facility.
Building a single-story storage facility costs $25 to $40 per square foot, excluding land and site improvement costs. On the other hand, building a multi-story storage facility costs $42 to $70 per square foot.
Land costs
The United States is home to at least 50,000 storage facilities, and the sector is still growing. The multi-billion storage unit industry is constantly expanding to meet increasing demand as businesses and individuals continue to seek storage space. Still, starting a profitable storage unit business can be expensive.
Land costs account for a big portion of storage development costs. Land costs range from $1.25 to $3.25 per square foot. Land costs should generally take up 25 to 30% of total development costs. Since you can only use approximately 45% of the land for development, the land cost can add up to $6.82 per leasable square foot.
Statistics show that 52% of storage units are located in suburban areas, 32% in urban areas, and 16% in rural areas. The actual amount you pay for land depends on the location. Rental prices in the market will dictate how much you will pay per leasable square foot. However, storage units can generate the same income as medium-priced apartments in that area.
Construction costs
Estimating construction costs for a storage unit can be challenging because construction costs are variable. However, construction costs range from $4.25 to $8 per square foot, depending on the site’s landscape. The cost will fluctuate depending on the amount of clearing, digging, and draining required.
Building a single-story storage facility costs an average of $25 to $45 per square foot. On the other hand, a multi-story storage facility will cost $42 to $70 per square foot.
Investors can expect to pay $45 to $45 per square foot to construct a high-end storage facility. High-end storage facilities cover 60,000-80,000 square feet and feature different amenities, which may drive construction costs.
Materials
Storage units are typically built using steel. The materials for a storage unit can cost anywhere between $25 and $70. However, steel prices are always subject to change, and the material costs can vary significantly depending on the area and at any given time. For example, the cost of materials will typically be higher in a major urban area than in a small local community.
Site preparation
Once you have decided where to build your storage unit, you must prepare and clear the site for development. Site preparation costs vary depending on terrain and vegetation.
You can expect to pay up to $15 per square foot if the site is sloped and covered in heavy vegetation. However, site preparation costs can be as low as $3 to $6 per square foot in relatively flatter areas with light vegetation.
Labor
The average cost of labor when building a storage unit is $26 per square foot. The cost of labor will depend on factors such as labor shortage.
Additional costs
Once your storage facility is ready; you will need to market it to attract customers. However, marketing costs should not surpass 8% of gross revenue. Your storage business may not pick until after 24 months, so do not get pressured into spending too much money on marketing.
Operating costs typically range from $2.75 to $3.25 per square foot, with a national average of $3.78 per square foot. Operating costs are influenced by several factors, such as salary costs and amenities offered. For example, operating costs are higher in climate-controlled storage facilities.
Summary
Storage units are all the rage in the United States and are, therefore, a good investment idea. However, one must consider the cost of building a storage unit before deciding to build one. The total development costs will depend on the type of storage units, the location, and the site preparation costs.
Building a storage facility costs approximately $25 to $70 per square foot, depending on the number of stories and the amenities provided. However, these costs do not include parking, site preparation, or landscaping.
