Building Blunders: 10 Mistakes Made During Facility Development

Expected to reach $51.23 billion by 2030, the current size of the self-storage market in the United States is $45.41 billion, according to a research report by Mordor Intelligence. With over 52,000 facilities in the U.S., as stated by the Self Storage Association, the compound annual growth rate (CAGR) is at 2.44 percent, representing the pace at which the U.S. self-storage market is growing. Globally, the CAGR is even higher at 4.15 percent. 

These numbers showcase that as self-storage grows in demand and popularity, the industry becomes a greater opportunity for investors. However, before diving headfirst into a new business venture, it’s important to learn about the market and its nuances. And who better to learn from than professionals with years of self-storage experience? 

MSM spoke with David Meinecke, the vice president of business development at Jordan Architects. He’s a member of the Self Storage Association’s Young Leaders Group (YLG) and has over 10 years of experience in self-storage design. In addition, MSM interviewed Tarik Williams, president of TLW Construction. He has developed three storage projects independently and worked on the design and construction of an estimated 4 million square feet of self-storage projects. Finally, we spoke with Ted Culbreth, the vice president of sales and marketing at SBS Construction. He has been working at SBS Construction for 20 years and has 30 years of experience in the self-storage industry. 

Each of these experts shared errors that occur frequently in their lines of work, as well as how investors and aspiring self-storage professionals can avoid these common missteps.  

1. Failing to build a team at the appropriate time 

“People who are the most successful developers of self-storage will put their team together before they really begin searching for a site to build on,” says Ted Culbreth.  

There are many professionals involved in the process of developing a self-storage facility, including engineers, architects, and contractors. If an investor forms their team in the beginning stage, before they make decisions regarding the project, such as settling on a site, for example, they’re more likely to make better-informed choices based on the expertise of all the professionals onboard and avoid costly mistakes in the future.  

Culbreth advises hiring a commercial real estate broker, a well-connected civil engineer, an architect, and a third-party management company if they’re not going to manage the facility themselves. 

“It takes all of the professionals to see this project through, so if you can start having everyone review the decisions that are made by each professional in the beginning, then you’re more than likely going to get those scenarios solved before they become problems,” Culbreth adds. 

2. Employing professionals with little self-storage experience 

While building the dream team during the development process, it’s important to select professionals with self-storage experience. A civil engineer, for example, can be excellent at their job. However, if they don’t have experience in the industry, they might not be the right person for the role.  

“Self-storage isn’t rocket science, but there are nuances that are involved in all aspects of it, and when you get someone with experience, you don’t have to spend a portion of the process educating them on the product that you are trying to put in place,” Culbreth says. 

“Choosing professionals who do have experience will save you a lot of time and costs down the road,” says David Meinecke, who has seen designs by professionals with no self-storage experience that often show “narrow drive aisles, odd shapes, and odd dimensions that make a unit mix difficult to deal with.”  

Professionals who don’t understand self-storage can directly affect the success of the final product. “I think a lot of the common mistakes you see are just underutilizing the property and not understanding the full functionality of self-storage and how it relates on an operational level to its clientele,” Meinecke adds. 

3. Forgetting about the geotechnical report 

A geotechnical report is a type of investigation done by a geotechnical engineer or engineering geologist that analyzes the conditions of a site, highlighting any potential issues in the ground before construction begins. It’s better to identify a problem, if there is any, on the site via the geotechnical report in the beginning stages, before breaking ground, rather than later down the line when a lot of time and money have already been invested in the project. 

Tarik Williams believes that the geotechnical report is a crucial part of the process. It can help the developer “determine if there are any kind of soil issues with their development that they don’t want to discover once they’re already pregnant on the property, far down the road,” Williams says. 

“A lot of our guys will get way down the road on a site without determining the geotechnical report and the civil implications of building on a particular site,” Culbreth adds. 

The geotechnical report can be done during the due diligence process before a site is even purchased. It’s also important not to get too excited about the price of a site before the geotechnical report results are available. “They’ll find a site, and maybe the price for the land is good, maybe the market study is good, and they won’t have looked into the geotechnical aspect of it to determine if the site is really buildable,” says Culbreth. 

5. Inattention to environmental factors 

During the development process of a self-storage facility, it’s important not to neglect environmental factors that may extend the timeline and add costs to the project. “In California, certain properties are required to go through what is called CEQA, which stands for California Environmental Quality Act, and that presents some timing issues,” Meinecke says. “We just had a project in Northern California that had to wait for four months for the city to develop a report about mitigation measures for certain plant species, animal species, and various things like that, so I think the environmental side of things can often be overlooked and under budgeted.”  

According to Williams, a Phase 1 or Phase 2 study can analyze possible environmental hazards that can affect the site and the project, and doing these studies in the beginning stages of the project can be very beneficial. “In a lot of markets around the U.S., there will be concerns about wetlands issues, endangered species issues, or possibly Native Americans’ historical discoveries on site. Anything along those lines should really be studied early on in the process,” says Williams.  

5. Neglecting dry and wet utility companies  

Williams advises developers to be engaged with dry and wet utility companies from the very beginning stages, even before hiring a general contractor. Dry utilities don’t involve water and encompass services such as electricity and telecommunications, for example. On the other hand, wet utilities include water, stormwater management, and sewage.  

He advises developers to stay on top of these demands with the help of their civil engineers and salespeople (regarding phone and data services), otherwise it can cause problems later on, and that’s an area where he sees people making mistakes often. “Developers need to be heavily engaged in that process, kind of from the time that they originally conceived the idea for development,” he states. 

6. Skipping market research  

“If you’re going into a market, you want to know it like the back of your hand,” Meinecke says, adding that not understanding the competition, the rates in the market, or bypassing the feasibility side of things can be “a costly mistake.” 

It’s important to understand what the competitors are doing, from their unit mix, design choices, and market efforts to their pricing strategies and where they’re located. A site can have an attractive price, but it’s beneficial to learn if it’s buildable by conducting the geotechnical report and studying construction possibilities. Knowing all of that information before beginning an active plan is very beneficial for the success of a project.  

7. Thinking it’s a quick process 

It takes a long time to develop a self-storage facility, and even longer for a return on investment. Knowing how long it takes is also part of market research and understanding the process.  

Williams states that there’s a long hold before there’s a return. “People coming into self-storage see it as a big cash-flowing business, and they want to walk right into it. I think they need to understand that, in most large municipalities, from the time an idea is conceived until it’s zoned, entitled, designed, permitted, and built could be anywhere from easily two years, if not four or five years, and then you have the lease-up phase beyond that, which is another two or three years. It could be anywhere from three to seven years, easily, from the time that they commit the money to do the deal until they get a return on it. Understanding the time is really critical.” 

“It’s not uncommon to take three years for something that’s an idea to actually become a facility that’s open. You could do it earlier, but it doesn’t shock me when that timeline is three years,” Culbreth adds. 

8. Underestimating additional costs  

Before beginning a self-storage development, the investor must know the very real possibility of additional costs, and that must be planned for within the budget. The additional costs may be because of mistakes during the project or even additional design demands that can occur. 

“It’s very difficult for us to have a contract that reflects everything the city is going to want upfront, whereas the city kind of makes those decisions as they go after you’re already under contract, so there are charges that get wrapped up and I think a lot of times clients don’t expect that,” Meinecke says. 

9. Ignoring the jurisdiction during the entitlement process 

To make sure the entitlement process of a property isn’t unnecessarily extended, the investor should pay attention to the zoning laws and choose a site that’s already zoned appropriately for a self-storage facility. 

“I see a lot of clients get hung up in lengthy entitlement processes on properties that they’re trying to kind of force, and they don’t have the timing needed that it takes to get that entitlement. Selecting a property that is zoned appropriately for self-storage to begin with is a much better step than trying to push something and going through this lengthy entitlement process,” Meinecke says. 

10. Inefficient communication with the team 

Since there are many professionals involved in developing a self-storage facility, and decisions are being made daily, it’s important that everyone is informed and agrees with the choices and the direction the project is heading. Williams believes that “There must be a weekly owner-architect-contractor meeting with a good agenda and good notes to solve all of those kinds of problems.” 

Good communication with the team is crucial for the success of a project, but it should also be extended to everyone else the investor may come in contact with. “For a new developer, they must be a very good communicator and very, very patient and diplomatic in all of their approaches with neighbors, with cities, with land owners. If you come off as brazen or disrespectful at any level along that, you can really struggle with the city approval and entitlement process, let’s just put it that way,” he adds. 

Even though there are many aspects of the self-storage industry to learn about before investing, and it may seem overwhelming, as Culbreth said, “self-storage isn’t rocket science.” It’s possible to learn all of the nuances of the industry and to be successful in that approach. Culbreth’s advice to new developers is “to surround yourself with experienced professionals who are good at what they do and pay them what it takes to get them on board, that will be the best money you spent on the whole project.” 

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Carolina Grassmann is a journalist and writer. Her work has been featured in HuffPost, Business Insider, Elite Daily, and other publications.