Storage facilities are one of the most secure businesses out there, even more, secure than real estate most of the time.
The need for storage facilities never dies out, and people always look for extra space for anything. Because of these reasons, you might want to build and operate a storage facility as a business.
Building and operating a storage facility is generally a great idea because its failure rate is extremely low.
On top of it, depending on the size and type of your storage facility, you could make a good profit.
If you are thinking about opening a storage facility, this article is for you. We will discuss all the costs related to building and opening a storage facility.
Average Cost to Build a Storage Facility
So to find out the cost of building a storage facility, you need to know specific things such as your local area’s prices, rents, permit fees, insurance, and so on. That’s why the range of average cost is quite big.
According to some reports, the national average to build a storage facility is between $25 to $70 per square foot. This includes all the costs from construction to marketing.
Here is a small breakdown of the expected costs:
Construction is the biggest expense when building a storage facility. Generally, the construction cost is between $5 to $8 per square foot for average storage facilities.
The bigger the facility gets, the higher the cost will be. On top of this cost, you need to pay for the building, which changes depending on single or multi-story storage units.
The most frequent thing that storage facilities do with their marketing budget is to set percentages instead of dollars.
The industry standard is spending about 6% to 8% of your gross income on marketing efforts. You can play around with this if your other costs are high in your first year of operation.
Insurance is a must for storage facility businesses, and they help to cover both you and your customers in case of an unexpected issue.
Storage facilities do not require as much insurance as many other businesses due to the type of business.
You generally need property and general liability insurance for your facility. The total cost of these insurances generally falls between $5,000 to $15,000 annually. The size of the facility also plays a role in your insurance premiums.
The good thing about storage facility businesses is that they do not require as much equipment as other businesses. So the costs for equipment are relatively lower.
You will generally get office equipment such as computers, phones, desks, chairs, and so on. All things considered, you can expect to pay about $0,20 per square foot.
Permits and Licenses
You will need specific permits whether you build your facility from scratch or buy an existing building.
Additionally, you might need to get certain licenses to start operating as a business. Both of these will have additional costs depending on your state or city.
Some frequent permits and licenses are:
- Occupancy permit
- Payroll tax registration
- Zoning permit/fees
Consult with the local administration to learn more about the permits and licenses as they change from region to region.
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Factors That Affect the Cost of Starting a Storage Facility
The costs of a storage facility generally change depending on several very important factors.
If you know what these factors are, you can easily make decisions that would economize on your costs while keeping the quality.
All these factors might not be relevant to your storage facility. Maybe some will be relevant but make sure to understand those relevant to you.
As you can imagine, rent and other property-related costs will be extremely higher in expensive regions and states.
In addition, other costs will also change on the same factor if the market is more expensive there. Where you choose to open your facility will affect both your start-up and ongoing costs.
Maintaining a massive storage facility requires extra labor, product use, and longer work hours.
Choose the size of your facility wisely, and if you try to anticipate what is the size that you could fill and not exaggerate the size.
Building or Buying
One of the most important and cost-driver issues is whether you are going to build your facility from scratch or buy an existing building.
Both have advantages and disadvantages, but buying is generally much cheaper than building. It depends on your goals and whether you can find something suitable for you.
The labor cost is one of the most expensive things for a business. The more labor you have or the higher you pay each employee, the higher your labor costs will be.
In some states, the average salaries are higher than in others, so it’s important to hire accordingly since the market average change based on each state.
Type of Storage Units
Storage units don’t come in one shape. Some are more sophisticated, and some are very simple, easy, and cheap.
The more sophisticated a storage unit is, the more expensive it will be. You need to find the balance between having expensive ones and cheap ones to keep your costs at bay.
Each of these units also has different maintenance costs that will affect your ongoing costs.
Getting Financing for Storage Facility
Storage facilities are not cheap businesses, and they might require high capital costs. So unless you have the money in cash, you are going to need to go for financing.
The most common financing method for storage facilities is commercial property loans.
The best and most frequent loan for storage facilities is an SBA 7 loan from Small Business Administration.
Generally, a certain percentage of these loans are guaranteed, meaning the government will cover that percentage in case of default. This makes it easier for individuals to get their loans from SBA.
You can also go for other options, such as crowdfunding or angel investing, but both of these options are not very favorable for business owners.
How Much Does a Storage Facility Make?
The numbers to build a storage facility might look like it’s worth taking the time and that you have the money for it.
However, how much can you expect to make in return? It’s hard to tell the exact number of storage facilities as the revenue and profit purely depend on how many facilities you have to offer.
Typically, the average cost for storage units is between $60 to $180 a month. If you have climate-controlled facilities, then the prices are between $75 to $225 a month.
Considering that you have ten normal storage units at $100 a month and ten climate-controlled ones at $200 a month, your monthly revenue would be $3,000, and you can get your profit by reducing the expenses out of this revenue.
Storage facility businesses are one of the less risky businesses to have as they have a success rate of over 90% across the United States. It takes between $25 to $70 per square foot to build and open a storage facility.
If we put this into the average size of a storage facility, the average cost is about $3.5 million, including all the costs.
Depending on your location, size of the storage facility, number of employees, type of storage units, and overhead costs, the cost could be way lower or higher than average.
Because storage facilities are easier to run and the success rate is higher, getting financing through loans is much easier and cheaper than for other businesses.
With the opportunity to make over $3,000 a month in revenue, a storage facility stands as a safe and profitable business to build.
How much will I need to run the storage facility?
Typically, you can expect to spend about $2.75 to $3.25 per gross square foot as the ongoing costs for the facility.
Variable costs change depending on your location, size, taxes, salaries, and utilities. In more expensive states and for bigger storage facilities, these numbers could double.
Can you fail with a storage facility?
Yes, but the failure rate of storage facilities is extremely low because the success rate of these businesses is 92%! If you can manage the facility well and make a decent amount of profit per facility, it’s highly unlikely that you will fail.
How long does it take to build a storage facility?
Building a storage facility is a lot of work, both financially and physically. Depending on the size of the expected storage facility and how you expect to have the finalized facility, the times could change a lot.
If you are going to buy land and build from scratch, it could take several months to a year.
However, if you buy an existing building and turn that into a storage facility, you could get it done in under a month or about one or two months.
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.