Building in a Brave New World
Sophisticated Self-Storage Development from Building, Design and Economics to Technology and Robots
by Jennifer Jones
“This has become a mature business,” says Charles Plunkett, owner of CAPCO Steel. In- deed. As the industry matures, developers need to be more strategic with their building plans and the type of facility they plan to build, as well as where they should build. And, they should completely understand their feasibility study.
“What can also kill a deal is failing to accurately estimate expenses such as property taxes and insurance,” says John Manes, owner of Pinnacle Storage Properties. “Those two things are rapidly rising. If you estimate property taxes at $50,000, but they come in at $150,000, then your deal can go down the tubes. In addition to that, your success depends upon having a good marketing plan such as a website and ongoing marketing efforts, making sure your operations are sound (by using a third-party management platform), securing your facility and using technology.”
BUILD IT AND THEY WILL COME?
Not necessarily. Savvy developers understand the self-storage industry and can fill a need while others can build and not be as successful. “I think where some owners miss the mark is when they build their own facility,” says Plunkett. “Some builders are in the construction business but haven’t built self storage before. They learn after the fact that this is not their cup of tea. “If I’m going to sell my house, I’m going to hire a realtor, because that’s not what I do. It’s where a lot of people make a mistake, they try to do it them- selves or hire someone who doesn’t have the right experience. Owners can get in trouble and they end up with a substandard product. One of the mistakes new people make is not getting qualified people in place from beginning to end. You need to get experienced people, or you can wind up with mistakes and headaches.”
From the feasibility study to the final marketing plan, everything that goes into a self-storage facility is a business decision and an investment. Like any business, staying ahead of the curve can make a big difference.
“There are things that you just don’t know, and you don’t know what you don’t know,” adds Plunkett. “You need to know from the beginning what type of project you’re building, what type of customers they will attract, the best timeframe and cost-effective way to go about building the facility. I think that’s an important element to realize. Hiring someone who is experienced with self storage can save a lot of time and trouble.”
BUILDING TO CODE
Although you do see sweeping, seven- story facilities, there’s a reason most of the facilities are fewer than three stories. Kiwi Construction builds one to three-story facilities in Texas and almost every CAPCO project is multi-story. Ted Culbreth with SBS Construction reports similar trends, especially for urban areas. “Three-story facilities are the sweet spot for us,” says Culbreth. “Anything over that and you have to fire-protect the structural framing, which adds to the cost. Two years ago, our average was 140,000 square feet and now it’s more in the 100,000 square feet range.”
Plunkett concurs. “Most facilities are three stories or less. In 2012, International Building Code changed requirements so that any building over three stories requires the entire superstructure to be one-hour (fire) rated. It adds about $10 per square foot to the cost of building. This means if you have a 100,000-square-foot facility, it will cost $1 million more to build four stories instead of three.
“There are workarounds. If you have a sloping hill, you can cut into the hill, tuck in part of the bottom floor and call it a basement. That ultimately gives you four stories. It can also depend on a city’s interpretation. Some cities allow you to build a concrete platform and then build on top of that. It costs more than your typical construction, but it isn’t the overwhelming cost of building a one-hour rated facility.
“A one-hour rated facility is built out of heavy steel instead of light gauge framing. You would need I-beams or tube columns and spray fire-proofing on the columns, which is like a ground- up newspaper substance that adheres to what you spray it on to protect the structure for one hour. It gives the fire department time to get there. Another option is building a full concrete structure which will achieve the one-hour rating.”
“There’s a myriad of designs and looks,” says Plunkett. “People are pushing the envelope in urban areas. They use the look of the building to act as signage to draw in customers because it looks like a well-done facility. I think everyone likes to be associated with something that is well done. An extremely nice facility will allow an owner to charge premium rent.
“Self storage is a destination purchase, not an impulse buy like the candy bar in the check-out line. People go to a facility because they need storage, and they want it located along their regular route. If there are several facilities to choose from, they will go to the nicer one. If you are in the self-storage facility office, it should look like the office of a country club—professional and inviting. Most customers will pay 10 percent more for a nice, well-lit facility instead of a dingy hole-in-the-wall. “Our industry has evolved to cater to customer choice. Therefore, a three-story building also becomes a marketing tool. We do projects with intricate exteriors and even have customers who bring in lighting consultants to see how the facility should be lit at night to gain maximum exposure. We see a trend in building the nicer facilities to get maximum attention.
“When it comes to hallways, I recommend people use high-gloss white doors in halls with white paint. You can choose a simple hallway or a high-end all-flush system. I like how the light reflects off the white, brightening every- thing up. It’s more inviting. The lighting actually reflects into the units lighting them up as well. So, on the units, where there are no interior lights, it can be helpful to the tenant. When you use colored doors (even a bright red or orange), it makes the area look darker.
“With hallway lighting, we mount the lights on the side of the corridor and put them every 15 feet. If the light is mounted on the side wall, it shines down on the unit.
“The industry standard for floors is
sealed concrete. However, we install a polished concrete floor with diamond- impregnated dust. The lighter the grit, the higher the polish. We use a densifier that is worked into that, the pores open up and soak it in which hardens the concrete and makes it resilient to staining. All you have to do is just run a dust mop over it, compared to a sealant, which has to be redone over time. Our polished concrete lasts longer.”
“I see a lot of facilities utilizing technology to attract customers,” says Culbreth. “I’ve even heard of some facilities using biometrics for additional security measures. Some people want that extra peace of mind when storing their belongings.”
Tammy Frost, divisional sales manager and marketing director with A-Lert Building Systems, agrees. “We’ve seen some of our customers moving away from having an onsite manager in favor of kiosks. LED lighting and solar panels are also becoming more popular for energy conservation. And for security, some facilities offer alarms on individual units with Janus’s SecurGuard.”
Chris Carter, owner of Sierra Ranch Storage in Houston, built his facility with the idea of an unmanned facility using kiosks. “We still have to go to the facility if we run a special, need to check on things or perform maintenance. I’m not sure that technology is to the point that you can truly have an unmanned facility, but the kiosks help and keep our operating expenses down.”
URBAN VS RURAL
“In rural areas, two to three elements come into play,” says Plunkett. “In this business, everything is relative. If you’re in an urban area, people are used to going in and going up. They aren’t opposed to going up in an elevator. If you’re in a rural area where there aren’t any multi- story buildings and people aren’t used to taking an elevator, then they may not like the inconvenience of going up an elevator at a self-storage facility.
“In addition, rent is typically less, so price per square foot is going to be less. The design needs to be simpler. You’ll want to spend your money in the front, like in the office, to make a good first impression.
“Most of our builds are at least 50 percent climate controlled. Some are 100 percent climate controlled, especially larger facilities in urban areas. In urban areas, there is a higher rent per square foot. Both the rural and urban guys will probably get a similar return on investment. The urban guy will spend more and charge more, while the rural guy will spend less and charge less.
“A lot of our customers are looking at opportunity costs if they have the choice between building in an urban or rural area. If you have $2-3 million in equity, you can invest that in one facility in the city. In a rural area, you would have to build two or three facilities to put in the same amount of equity, which means you’re putting out more effort in a rural area. You can get return on capital with less time and energy in an urban market.”
BARRIERS TO ENTRY AND OTHER PAIN POINTS
The cost of building a facility is a barrier for the average person. Carter says, “Not many people can afford to build an $8 million building. My wife and I own a few rental properties but wanted to venture into self storage. When you have to put up that kind of capital, I looked at how I could save on operating and other costs. One of the things I ended up doing was not putting in running water for bathrooms because we ran into more delays with city permits. We run a mostly un- manned facility using kiosks to save on employee expenses, but sometimes my wife is up there with the kids and it has become an issue that will also affect resale value.”
Wayne Woolsey, owner of Kiwi II Construction, adds, “In some states, crew shortage is an issue. We have a combination of in-house crews and subcontracted crews. The volume of jobs, along with changing schedules (projects being pushed back, winter weather and permits not being released, etc.), adds to project delays and crew issues based on changing start dates. There are many factors that make a project schedule change, crews are just one example.”
When subcontractors are hard to find, some self-storage builders have turned to Power Labor to complete their projects. Power Labor Chief Executive Officer Greg Siemankowski says, “We recently completed projects with CubeSmart in Carrollton and Lean- der Self Storage. We primarily supply licensed subcontractors in electrical, plumbing and HVAC, but we also have drywall guys and general laborers. We have jobs where we send out a guy for a couple of days and some we send 50 guys for a year and a half. For ex- ample, our contribution to building the Fairmont Hotel in Austin was a big job that required workers for an extended period of time. We can supply whatever the customer needs.”
Power Labor can also do full back- ground screenings and drug tests as needed. Their employees take a skills assessment up front, so the customer knows what they’re getting. All of their employees receive W-2s, and Power Labor pays the taxes, insurance, workers compensation, etc. “It really is a turn- key solution and we have offices in San Antonio, Austin, Dallas and Oklahoma City with a new office in Houston opening soon. Our crews go all over Texas, Louisiana, Oklahoma and Kansas.”
“All of the subcontractors in Texas are pretty busy,” says Plunkett. “That’s why it’s important to have good relationships with them. It’s a sign the economy is doing well, but it’s definitely an issue. It can affect time and cost. It’s important to be a well-known builder who is also known for paying the bills.”
When building materials increase in price, it affects the final price of building the facility. “We were just notified that steel prices are going up about five percent,” says Woolsey. “So, I would estimate 5 to 8 percent increase in this line item.”
Other challenges include tight spaces in urban areas. Woolsey is building a facility in Colorado on a post- age stamp-size lot. “The challenges of small sites add to the already complex schedule of building a four- to six-story project. This particular project has tight property line issues on two sides, with two streets and close power lines on the other two sides. Working with all other trades to keep this project moving forward comes down to coordination, site meetings and being able to adjust deliveries, crane use and having a great site superintendent.”
KNOW WHERE YOU’RE GOING
Having a solid plan of what your costs are going to be will ultimately determine the success of the facility. As many of the builders have attested, building a self-storage facility today means using experienced self-storage builders and sometimes the latest in technology to build and succeed in this brave new world.
“Our project wouldn’t be where it is today if we hadn’t partnered with experts in the self-storage industry,” says new developer Jason Schmer, a trustee for a trust that invests in real estate. “By bringing in experienced self-storage professionals, we were able to show credibility to the banks and investors. Their expertise also contributed to the success of each stage of the process along the way, adding due diligence that people outside of the storage industry wouldn’t think of, which will make the final project more profitable.”
For Chris Carter, owner of Sierra Ranch Storage in Houston, utilizing the latest technology was key to his dream of owning a self-storage facility. “It took us almost five years because of various delays, but we wouldn’t have built if it hadn’t been for Open- Tech and the available technology.”
Carter invested $100,000 worth of technology into his facility. Open- Tech’s Insomniac Kiosk is one of their technology investments. “People can pay on the kiosk, move-in or call to get help, which goes to a call center. We also installed Janus International’s SecurGuard locks on individual units, which gives our tenants additional security. People look at what it would cost, but you also have to look at the savings from not having any employees.”
Securing someone’s belongings is a top priority for any self-storage facility. With that in mind, Janus International developed a new type of lock, SecurGuard. According to Clay Cullins with Janus, the lock has four main features:
REMOTE OVERLOCK. If you have a large facility and want to overlock from the office or from another location (home office), you have the ability to do that so a tenant cannot get in.
REMOTE LOCATION. If your main location is in one area and then a couple of miles away you have an annex or buy another facility, then you can operate it independently from the main office. A tenant can pay at the main office and then go to annex, and it can be unlocked remotely.
ADDITIONAL SECURITY FEATURE. One part of the lock is mounted on the door guide or track. It sits at the bottom of the door and the receiver piece glides up and down. If some- one defeated the regular door latch, you still have the additional part on the back of the door holding it down securely.
NOTIFICATION FEATURE. The renter has the option to set up a notification system which works with PTI. If you use the Easycode app, a tenant can set it up so that it notifies them when someone accesses the unit for extra peace of mind. This is helpful to know if your customer is out of town and their son or daughter decides to get into the unit.
CAN ROBOTS RUN A FACILITY?
A world where robots replace humans typically calls up references of science fiction movies or books. While technology hasn’t been developed to the level of functionality of the types of robots in those movies, Wyca has developed a robot which makes an unmanned facility a possibility.
“The robot replaces the need for an onsite person without sacrificing service,” says Matthieu Besozzi, co-founder of Wyca and self-storage owner in France. Like many inventions, Keylo the self-storage robot came about because Besozzi and his partner had a problem they needed to solve.
“We have a large facility on the outskirts of town and wanted to open a facility in a more central location. Because of the cost of this location, we needed to reduce expenses with an unmanned facility while also continuing to provide a high level of customer service as well as keeping rents where they needed to be for ROI and competitiveness.
“We decided a robot would be a good solution. We tested some off- the-shelf robots, but nothing adapted to what we all need in self storage, such as the ability to dispense a lock, display a lease agreement, sign a lease agreement, take a picture of an ID, etc. Since we still didn’t have the solution we wanted, we raised seed money, created a company and launched the development of the prototype.
Wyca chose to exhibit in Amsterdam which is where Europe’s SSA equivalent holds their trade show. “We met with the big self-storage guys in Europe, got their feedback and also met our first American contacts. We continued to tweak our prototype and took it to ISS in Las Vegas in 2016, which is when we met the folks at OpenTech, who will be our distributor in the US.
HOW IT WORKS
The robot is controlled remotely and has a two-way video, so the potential tenant can speak to and see a live per- son similar to Skype. The robot’s system is connected to a platform where a person (or call center) on the other side can see the incoming call. That person can have a conversation with the client, click where they want the robot to go
if they need to show units, execute a lease agreement, photograph the ten- ant’s ID and dispense a lock.
“We mainly design the robots to have a human being on the other side because we believe they are the most qualified to sell a unit. It’s important for someone to take control of the robot and maneuver it. The technology is not advanced enough to do it all by itself, perhaps in five to 10 years, but so far human beings are better.
“We are working with one of our German clients to develop a new ap- plication which will allow the robot to work autonomously with the client’s CRM to sell and show units as well as accept deliveries.
“So far, we recommend and have one robot per facility, which has worked well. We are still assessing whether that is sufficient for our client who has a 100,000 square-foot facility. The robot connects to the API of the elevator, opens the door so the robot can get inside and asks the elevator to move to the appropriate floor. After the door opens and the robot exits the elevator, there are QR codes on each floor so the robot is able to locate itself and load the relevant map and show the appropriate unit to the prospective tenant, all while the remote person is carrying on a conversation with the customer.
“In May 2016, we placed our first robot with Zebra Box in Switzerland. Since then, we have manufactured and placed 19 more all over Europe and with more big names such as
Blue Space in Spain and Home Box in France. We also have clients in Germany and the UK.
About 50 percent of the time, the robots attend to visiting with clients for leasing, showing units, etc. The other part of the time, they are dedicated to facility management such as checking the cleanliness of the facility, checking locks and other maintenance.
“One of our clients employs some- one to come in for half a day once a week to clean the corridor and load locks into the robot’s dispenser. They have a 12,000 square foot facility.”
“It significantly cuts down on labor costs. We found that most people’s concept of an unmanned facility resulted in a low level of service. Europe has crazy real estate prices and we needed to find ways to cut costs without sacrificing service. With the robot, you can still talk to the client using a two-way video, show them units, lease units and perform maintenance tasks such as ‘walking’ the facility and checking for cleanliness.”
It can also provide 24/7 security and increases response time. “If an alarm goes off at your facility, you can maneuver the robot and check on the unit to see if someone is stealing or if it’s a false alarm. A security guard could take 15 to 20 minutes to arrive, but the robot goes straightaway.”
ROBOT VS KIOSK
A kiosk is outside, and a robot is inside. While the robot can handle basic amounts of indoor dust and debris, it isn’t built to withstand the outside elements and weather.
The interactivity is a huge difference.
A kiosk is dedicated to leasing a unit and collecting payments. A customer can rent a unit through a kiosk, but isn’t able to see different sizes unless an onsite manager is there.
A robot can sell units and improve the property management. If you want to rent more and increase your conversion ratio, you need to be able to show units to customers. If you want to show a unit to a prospective tenant, you need to either have a guy onsite or have a robot onsite to guide them. Guiding
the robot can be done remotely from a centralized headquarters or anywhere.
The robot costs $24,000 while a higher-end kiosk model costs $22,000.
WANT TO TRY IT OUT?
Wyca and OpenTech are looking to place units in the United States. The ideal test facility has an indoor facility. “An ideal tester has 20 or so facilities with a central location.”
In addition to serving as managing editor for Self-Storage News, Jennifer Jones, owner of JKJ Marketing, provides digital and traditional marketing strategies and content to a variety of clients in various industries to help them connect and engage with their audience and grow their business through digital content marketing, analytics, social media and SEO. She can be reached at email@example.com.