Steel Self-Storage Facilities and the Rising Prices of Steel

Owners and investors alike looking to get involved in the self-storage industry are concerned with the continual increases seen in steel prices worldwide. In fact, the volatility of the steel market today has never been witnessed by a number of steel self-storage facility companies that have been in business for a number of years. Steel self-storage facility manufacturers are also concerned with possible allocations of steel reducing the amount available for their production processes and orders.

At the current time worldwide production facilities in the steel industry are operating at close to capacity but most economic forecasters are predicting shortages that will run well into the year 2006. The supply of steel is low and will remain low while the demand is at record heights. Most economists see a number of factors that have massed together at one time to contribute to the problem. Increased steel demand by both the United States and China is consuming over 56% of the total production available, our domestic tariffs on any imported steel have increased prices, and raw material shortages and price increases have all weighed heavily on both the escalating price and the critical shortages of steel on the global market today.

If you are considering a steel self-storage facility as an investor, developer or owner this may give pause to your project considerations without any steel price stabilization apparent on the 2005 economic horizon. Many self-storage projects are continuing domestically with investors “locking in” their contract price and proceeding with their development before steel price increases take the cost of their planned project beyond budget. On the positive side, the need for self-storage facilities continues to be a burgeoning market domestically with some selected regions of the United States having needed self-storage space far outdistancing the facilities available. Compared to other more conventional construction methods and materials (whose costs also continue to rise), steel is still the most effective and economical choice for anyone considering building a self-storage facility. Steel self-storage buildings are arguably one of the highest revenue producing entities available to any owner or operator in the real estate business so the demand for these facilities to get up and running is at record highs. The bottom line in the self-storage business is to not allow cost increases to hamper necessary and profitable building ventures.

Any steel self-storage project has other factors that contribute to the total cost of a turn-key facility. Concrete, electrics, insulation and onsite labor costs contribute heavily to the final price tag and the price of steel becomes a minority consideration for the project and less burdensome when seen as just a part of the overall picture. Seen another way, if steel prices were to climb 20% overnight on an initial “ground-up” estimate of $40 a square foot for the project and steel was seen as !0% of the overall project cost, the new steel costs would raise the price of the total project by only .80 cents a square foot.