Category Archives: Self-Storage Construction

How Self-Storage Construction Can Improve Your Cash Flow

 Issue 77 – Cube Smart, Arlington, VA

Introduction…Tuesday Texas Self-Storage Association met in Dallas for their annual “Trends in Self-Storage Construction” update panel.  What we learned can increase your cash flow.

Major trends…The major shift is the increased size properties the REITs and other public entities are building today.  Three or four years ago, a 100,000 square foot storage facility was considered large.  Now, 200,000 to 300,000 square foot storage facilities are being built by many operators.

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This means more 4, 5 or taller storage facilities are being built in high-density areas of the city.  How this can improve your cash flow follows a little later.

The largest cause of cost escalations…This surprised me and it may surprise you.  The largest single cause of cost increases for self-storage in urban areas is architectural control. Instead of putting up an all steel building as in the past, now cities are requiring brick, stucco, and/or expensive exterior materials.

Some cities require these higher cost exteriors on that which can be seen from the street.  But, others require it for all the buildings plus articulation on the front facing area.

Increase in insulation and number of bathrooms also have been added by some. As well as structural fire suppression systems.   But, these items are much less expensive than the architectural control items above.

What about green initiatives in self-storage construction?  Generally, the primary driving factor in building storage properties is keeping the construction costs as low as possible.  In many areas of the country, the cost of going green outweighs the savings.  However, one developer who builds in the Texas Rio Grand area builds solar and wind energy in all their new projects.

However, in North Texas solar and wind are not economical, so he doesn’t use it here.

How to increase your cash flow?  This message was expressed by several of the panel participants.  The advice was to stay out of the urban areas where the REITs are building or are likely to build.  During lease up, which could take several years, they will cut rents by 50%.  Then later, manage rental rate increases.  That is similar to the retail category killers that put many mom and pops retail out of business.  Be on guard.

In conclusion…So where should be build and buy storage properties today?  Stay out of the 50 major urban centers.  Focus on the tertiary markets as we have done and are doing today.  This little tip could make you or save you tens or hundreds of thousands of dollars.

To learn how you can get passive residual income from self-storage, “Get 9 Little Known Secrets For Steady Real Estate Income – FREE”  at self-storageinsider.com.

To watch the video, click here now.