Self storage construction cost risk, on a repeatable building and a difficult site

Self storage construction cost risk sits almost entirely below the finished floor. The building above is a prototype repeated across a portfolio. The site under it is different every time, and so is what the jurisdiction requires on it.

The building is solved and the site is not

Self storage is one of the most standardized building types in commercial construction. Operators build to a prototype: the same structure, the same unit mix logic, the same corridor widths, the same door product, the same climate control approach.

That standardization is genuinely valuable. The building cost per square foot is predictable, the trades know the product, and an estimator pricing the tenth one of these has a very good idea what it costs.

What does not repeat is the site. These buildings go on infill parcels, on former industrial land, on awkward remainders that were not developable for something else, and on sites chosen for a traffic count rather than for ease of construction.

So the cost structure is inverted relative to most building types. The superstructure is a known quantity and the site is the variable, sometimes by a large margin.

The commercial question at signature is therefore not whether the building is priced correctly. It usually is. It is what the site assumptions are and what happens if they are wrong.

Everything below is that question.

Where self storage construction cost risk sits

Soils and below grade. Infill and former industrial sites carry unsuitable material, buried foundations, old utilities, fill of unknown origin and occasionally contamination. Every one of those is usually an exclusion rather than an allowance.

Stormwater. A large impervious footprint on a constrained site frequently needs detention or retention, sometimes underground, which is expensive and site specific.

Utilities. Connection points, capacity, distance to the main and whatever the utility requires by way of upgrade. On an infill parcel the nearest adequate service can be a long way away.

Entitlement conditions. Facade treatment, landscaping, screening, traffic improvements and sometimes off site work required by the approval. These are frequently agreed after the design and before construction, which is exactly the wrong order.

Access and logistics. A constrained site with limited staging affects productivity across every trade and is rarely priced as a separate line.

Four of those five are entirely knowable before the price is fixed. The fifth, soils, is knowable for the cost of a geotechnical report.

The entitlement condition problem

This one is specific to the building type and worth separating out.

Self storage is frequently a contested use. It generates little employment, little tax revenue relative to its footprint and no foot traffic, so jurisdictions approve it with conditions attached.

Those conditions are negotiated during entitlement, which is a planning process run by a different team, and they land as requirements: a masonry facade rather than metal, a landscape buffer, a screen wall, a traffic signal, a sidewalk extension or a storm improvement off the site.

Each of those is a construction cost. Several of them are substantial. And the approval that created them is frequently granted after the building prototype has been priced.

The result is a guaranteed maximum price for a prototype building, on a site whose approval requires a building that is not quite the prototype.

The correction is a reading exercise: take the conditions of approval and compare them line by line against the scope of work. It is an hour and it is skipped on most projects because the two documents live with different teams, which is the same problem described in what a guaranteed maximum price actually guarantees.

A worked example

A three story climate controlled facility of 92,000 rentable square feet on an infill parcel, priced at $11.4 million against the operator prototype.

The building portion prices within two percent of the last four in the portfolio, which is exactly what a prototype should do.

The site does not. Unsuitable fill over roughly 40 percent of the footprint requires undercut and replacement, $420,000, excluded on the qualifications page. Underground stormwater detention required by the jurisdiction, $310,000, not in the prototype scope. Conditions of approval require a masonry facade on two elevations rather than metal, $380,000. A sanitary connection 340 feet further than assumed, $190,000.

Total $1.3 million on an $11.4 million contract, which is 11 percent, and none of it is the building.

Three of the four were documented before the price was fixed: the conditions of approval, the stormwater requirement and the utility distance. Only the fill was genuinely unknown, and a geotechnical report would have priced it.

What portfolio owners should do differently

An owner building one of these has a different problem from an owner building six.

For a portfolio, the useful move is to separate the price into the prototype and the site, permanently, across every project. The prototype cost becomes a benchmark that improves with every building, and the site cost becomes the only thing anybody has to underwrite.

That split also makes the contractor comparison meaningful. Two contractors pricing the same prototype differently is information. Two contractors pricing a whole project differently on different site assumptions is noise.

The second move is a standing site checklist used before every acquisition: geotechnical, utility distances and capacity, stormwater requirement, and a review of what the jurisdiction typically conditions on this use.

Four items, done before the land is bought, and they price the difference between one site and another at the moment it can still affect what you pay for the land.

That is the highest value moment in the whole sequence and it is well before anybody is reading a construction contract.

The third move is to stop treating the prototype as fixed. A prototype that has been built eight times has eight sets of findings behind it, and feeding those back into the standard drawings is the cheapest improvement available to a portfolio owner.

Most operators do this for operational items, unit mix and door hardware, and very few do it for the construction detail that caused a change order on three consecutive buildings. The information exists in the change order logs and nobody reads them across projects.

What to do before you sign

1. Split the price into prototype and site, and compare the prototype against your other buildings.
2. Read the conditions of approval line by line against the construction scope of work.
3. Confirm a geotechnical report exists and that the earthwork was priced from it.
4. Count the uncapped exclusions in site work, because they are usually the entire exposure.
5. Confirm the stormwater requirement and whether the solution is priced or assumed.
6. Confirm utility connection points, distances and any required capacity upgrade.
7. Establish what the site constraints do to productivity, and whether that is priced anywhere.

Item two is the one that recurs on this building type more than any other. The conditions of approval are a public document, the scope of work is in front of you, and the comparison is a reading exercise that regularly finds six figures.

Item one is what makes the next project easier. A portfolio owner who has split every price this way has a prototype benchmark nobody else has, and it makes every subsequent negotiation shorter.

The scope options for this reading sit in the review packages.

What we do

We split the price into prototype and site, read the conditions of approval against the scope of work, and price every uncapped site exclusion. For portfolio owners we keep the prototype benchmark so the next building is compared against the last four rather than against a market rate. The work is the readiness review.

Questions people ask