How Much Does It Cost to Start a Self-Storage Business?

Self-storage is a booming industry that offers a profitable opportunity for entrepreneurs. According to IBIS World, the U.S. self-storage industry generated $37 billion in revenue in 2019, with a projected annual growth rate of 2.5%.

Self-storage facilities provide space for customers to store their belongings, such as furniture, appliances, vehicles, or inventory, for a monthly fee.

Self-storage businesses can operate in various locations, such as urban, suburban, or rural areas, and cater to different market segments, such as residential, commercial, or industrial customers.

But how much does it cost to start a self-storage business? The answer depends on several factors, such as the size, location, type, and design of the facility, the financing options, the legal and regulatory requirements, and the marketing and operational strategies.

In this blog post, we will explore some of the main costs involved in starting a self-storage business and provide some tips on how to plan and budget for them.

Land Acquisition

One of the first and most significant costs of starting a self-storage business is acquiring the land where the facility will be built or located. The cost of land varies widely depending on the location, size, zoning, and availability of the property.

According to Storable, a self-storage software company, the average self-storage facility covers 2.5 to 5 acres of land, and the land cost can range from $100,000 to $2 million per acre.

Therefore, the total land cost can range from $250,000 to $10 million for a typical self-storage facility.

However, not all self-storage businesses require purchasing land. Some entrepreneurs may choose to lease an existing building or land, convert an existing structure, such as a warehouse or a garage, into a self-storage facility, or partner with a landowner to share the profits.

These options can reduce the upfront cost of land acquisition, but they may also entail additional costs, such as rent, renovation, or profit-sharing.

Construction and Development

Another major cost of starting a self-storage business is constructing and developing the facility. This includes the cost of building materials, labor, equipment, utilities, landscaping, paving, fencing, security, signage, and other amenities.

The cost of construction and development depends on the size, type, and design of the facility, as well as the local market conditions and regulations.

According to ProjectionHub, a financial projection software company, the average cost of construction and development for a self-storage facility is $25 to $40 per square foot.

Therefore, the total cost of construction and development can range from $1.25 million to $2 million for a 50,000-square-foot facility, which is the average size of a self-storage facility in the U.S.

However, not all self-storage businesses require building a new facility from scratch. Some entrepreneurs may choose to buy an existing facility, renovate an existing structure, or use prefabricated or modular units.

These options can reduce the cost of construction and development, but they may also entail additional costs, such as acquisition, renovation, or installation.

Legal and Permit Fees

Another cost of starting a self-storage business is obtaining the necessary legal and permit fees to operate as a business in the area.

This includes the cost of forming a legal entity, such as a corporation or a limited liability company, registering the business name, obtaining a tax identification number, applying for a business license, zoning approval, building permit, environmental permit, fire safety permit, and other required permits and inspections.

The cost of legal and permit fees varies depending on the location, size, type, and complexity of the facility, as well as the local laws and regulations.

According to StoreLocal, a self-storage cooperative, the average cost of legal and permit fees for a self-storage facility is $50,000 to $100,000.

Marketing and Advertising

Another cost of starting a self-storage business is marketing and advertising the facility to attract and retain customers.

This includes the cost of creating a website, logo, brochure, business card, and other promotional materials, as well as the cost of advertising on online platforms, such as Google, Facebook, or Yelp, or offline platforms, such as newspapers, magazines, radio, or TV.

The cost of marketing and advertising depends on the size, location, type, and target market of the facility, as well as the competitive landscape and the marketing strategy.

According to StarterStory, a platform for entrepreneurs, the average cost of marketing and advertising for a self-storage business is $1,000 to $5,000 per month.

Insurance

Another cost of starting a self-storage business is obtaining the necessary insurance to protect the business from potential risks and liabilities.

This includes the cost of property insurance, liability insurance, workers’ compensation insurance, business interruption insurance, and other optional insurance, such as flood insurance, earthquake insurance, or cyber insurance.

The cost of insurance depends on the location, size, type, and value of the facility, as well as the coverage and deductible levels.

According to StoreLocal, the average cost of insurance for a self-storage facility is $0.50 to $1.00 per square foot per year. Therefore, the total cost of insurance can range from $25,000 to $50,000 per year for a 50,000-square-foot facility.

Operating Costs

Another cost of starting a self-storage business is covering the ongoing operating costs of running the facility.

This includes the cost of utilities, such as electricity, water, gas, and internet, the cost of maintenance, such as cleaning, repairs, pest control, and landscaping, the cost of payroll, such as salaries, wages, benefits, and taxes, the cost of supplies, such as locks, boxes, tape, and scissors, and the cost of fees, such as taxes, loan payments, rent, or profit-sharing.

The cost of operating costs depends on the size, location, type, and occupancy rate of the facility, as well as the management and operational efficiency of the business.

According to StoreLocal, the average operating cost for a self-storage facility is $3 to $6 per square foot per year. Therefore, the total operating cost can range from $150,000 to $300,000 per year for a 50,000-square-foot facility.

Conclusion

As you can see, the cost of starting a self-storage business can vary widely depending on several factors.

However, based on the average costs of the main categories mentioned above, we can estimate that the total cost to start a self-storage business can range from $1.5 million to $2.4 million, according to ProjectionHub.

Of course, this is just a rough estimate, and you should do your research and planning to determine the exact cost of starting a self-storage business in your area and situation.