The managing director of self-storage development for Wentworth Property Company, David Brown, like many other successful professionals in the self-storage industry, started his career working for a commercial real estate developer, which also marked a big new chapter in his life, as he had to move from Arizona to Pennsylvania.
“I was born and raised in Arizona, and I accepted a job in Philadelphia, which might as well have been a foreign country,” says Brown. “I was lucky to work with a great group. I was taken under the wing by a local real estate developer who was very instrumental in teaching me the business of development.”
Besides learning the ins and outs of commercial real estate, Brown also learned the company’s specialty: adaptive reuse of historic properties. “Adaptive reuse of old buildings is a very niche job, and navigating the national parks process to get a property to qualify for the tax incentives is very complicated. It was fascinating to take old, dilapidated buildings and not only work with someone who had a vision of redeveloping them but to then take the project full circle from working on the entitlement side to lease negotiations to actual construction and handing the property over to a tenant,” he says. “We worked on several projects that included the expansion of an old 1910s Kiwi shoe polish building that was a former brownfield site to a 1920s train station that we converted to classroom space for Montgomery County Community College.”
After seven years of learning the trade, Brown became homesick, missing the familiar mountain scenery of Arizona and his biggest support system–his family. It was then that he decided to return to his hometown with hopes of becoming a professional golfer. “I moved back to Phoenix and thought I would become a professional golfer,” he says. “Turns out I am terrible at golf, and that wasn’t going to happen.”
It was then that Brown received a gentle push from his father-in-law, Kent Greenwald, a self-storage industry veteran. That nudge led him to decide to give the industry a try, and he achieved success from the start. “My father-in-law, Kent Greenwald, had been in storage since the RTC days and pushed me to consider self-storage development. From there, it was finding a local group that wanted to do that, and I was fortunate enough to develop three ground-up self-storage facilities before joining Wentworth Property Company in 2015.”
As someone fortunate enough to find success in his investment early on, Brown has a few tips up his sleeves to share with anyone looking to lay the ground before starting to look for capital to open their first facility.
“It starts with finding the right spot. Development isn’t easy,” he says. “You need to find the right location that allows you to build the right product for the market. Once you find it, you will need to get through the entitlement process, which in some cases can take over a year. Finding funding is something you should do after you are sure you are going to be successful with the entitlements.”
Coming from a conversion background in real estate, he has a few expert thoughts on when it is best to convert and when to develop from the ground up. “In mega MSAs, the ability to find dirt is often not there. To enter some markets, we have had to acquire old retail, industrial, and office buildings. But beware, not every building warrants itself to be converted to storage. Office buildings have lower floor loads that require you to increase the load factor, and that can be very expensive or even impossible to do.”
Brown highlights a few key factors to determine if a location is viable for developing a new facility today. “I generally start my evaluations by looking at population density, average household income, existing self-storage square footage per capita, and most importantly rents,” he says. “If the rents aren’t high enough in a market, move on. If the supply is too high, move on. Also, don’t be the person who builds across the street from someone else. It will lead to years of regret for you and your neighbor.”
For anyone looking to de-risk projects before presenting them to investors, Brown suggests waiting to close on the land to avoid headaches. “We don’t close on land until the entitlements have been completed,” he says. “Don’t put yourself in a situation where you can get stuck. Also, be mindful of the permitting process. We do this day in and day out, and we still find municipalities that have extreme review periods, and permitting can take upwards of a year in some cases.”
In his experience, he has seen some first-time developers fall into some common pitfalls. “The most common mistake I see is believing that a site is good when not paying attention to the barriers to entry or trying to build into someone else. Also, developing is not easy or cheap. I often blame my hair loss on the pitfalls of the development process.”
The biggest cost drivers continue to be the construction itself. “Construction cost is the biggest driver. Making sure that your budget is in line with actual costs is integral to your project. Once you get a site plan and concept elevations, get a qualified GC’s input on the cost, and make sure that your proforma isn’t going to get busted.”
Brown suggests keeping an eye on the recent increase in permit and impact fees to avoid driving up costs during development, which can kill your margins post-launch. “We have also seen a major increase in permit and impact fees throughout the country. We recently had a project that we estimated to have $500,000 in permit and impact fees, and the actual cost was double that. That was a huge hit to the project.”
Like many industry professionals, he has found the self-storage community to be one of the most hospitable ones. “If you are new, I would recommend getting involved in your state storage associations for resources and meeting folks who have a reputable background in developing. One of the best things about the storage community is how open and helpful folks are.”
When it comes to a typical construction timeline for building from the ground up, he mentions his “typical timeline is 12 to 15 months, depending on the project,” but investing in a good general contracting (GC) team is key to accelerating it. “The best way to accelerate the process is to have a competent GC team that is constantly looking for ways to improve the schedule and looking for ways to avoid any issues on inspections,” says Brown. “Elevators are a huge problem for us, and getting ahead of any pitfalls is crucial to opening the doors.”
Innovations that have positively surprised him in construction are currently gaining traction in the industry. “We have built several single-story projects lately, and my friends who own metal building companies can attest that it is the easiest and most cost-effective way to build,” Brown says. “The trouble is that most cities hate it. They want CMU or alternative building materials used with intricate building elements.”
Brown also shared a few remarks and words of wisdom from his decade-long experience in the business. “I think the biggest thing a developer can do is be mindful of the product that they are developing,” he says. “I have seen several groups develop a three-story climate-controlled project in an area that really wants traditional drive-up products. Storage development isn’t a ‘one-size-fits-all’ product. We are big on having a unit for everyone, i.e., traditional drive-up, interior walk-in non-climate, and true climate-controlled space. Whether that is a local business that has needs, the stay-at-home mom who has a side hustle, or the family that needs to free up space at home. Also, the other miss I see is not paying attention to the security side of things. We typically put a minimum of 64 cameras in our new builds. Folks are paying you for security; you better make sure you are providing that.”
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Victória Oliveira is a senior writer with over a decade of content experience under her belt. Her work has been featured on Darling Magazine, Elite Daily, The Culture-ist, Matador Network, and more.