Rents are another key to the success of self storage properties. The average annual rent ranges for the real-estate surveyed in our study are as follows:
• Multifamily–$7.5 to $12 per square foot
• Office–$14 to $24 per square foot
• Retail–$16 to $20 per square foot
• Self storage–$6.5 to $12 per square foot
Self storage rents fall within the range of other real estate projects. It is not uncommon for customers to pay the same or more per square foot for storage as they do for living in an apartment. This rent comparison is even more enlightening when comparing rents to average development cost per type of real estate. The average development cost per real-estate property surveyed is as follows:
• Multifamily–$60 to $70 per square foot
• Office–$50 to $100 per square foot
• Retail–$50 to $80 per square foot
• Self storage–$34 to $42 per square foot
When comparing both rents and total development costs, self storage most often has rents that are slightly less. But self storage has a total development cost that is a third to one-half that of multifamily, office or retail properties. To the investor, this means a considerable less investment or loan amount to be serviced while having comparable rents to other real-estate investments.
The cost of operating and the actual management requirements is another key element that is appealing to investors. As stated earlier, self storage operating costs range from $2.75 to $3.25 per net-leasable square foot. Compare this to operating costs for the other real-estate properties surveyed, which range from $3.50 to $5 per square foot. Apartments, office and retail properties have to continually maintain the grounds, appliances, plumbing, electrical fixtures and a variety of other maintenance concerns, which usually require a maintenance staff.
There are apartment “make-readies” and interior remodeling for new office and retail tenants. In comparison, self storage usually has one or two managers and very few of the maintenance “headaches” associated with “live-in” tenants. In general, a self storage investor has very few of the problems associated with other real estate properties.
The “bottom line” in comparing self storage to other real-estate investments is that the investor can realize much higher ROI for the typical self-storage property than for other real-estate investments. Secondly, the investor’s initial investment is a third or one-half that required by other real-estate investments. Due to the lower break-even occupancies, the investor should anticipate investment cashflow sooner and a much lower element of risk in relation to economic declines and their effect on lower occupancies and rents. The investor does not have to worry about additional capital requirements relating to tenant improvements or continual maintenance.
The advantages for investing in self storage mentioned above have been and will continue to be the key elements for its success. The self storage industry’s future is very bright. The industry will continue to mature along with demand for its use. Those investors who venture into self storage will discover what the industry pioneers did 25 years ago: Self storage is one of the best investment vehicles available in this country, now and in the future.
Download & View Table 1: Financial Model
A. Statement of Cashflow
B. Statement of Development Cost Annual
C. Project Specifications
D. Development Financial Variables
E. Development Financials