What is the step-by-step guide to build a real estate project from scratch? What are the best practices for the construction of self-storage, RV, and boat storage? What are some of the main legal items to keep in mind? Melissa Anderson of Forge Building Company, shares her knowledge.
Tell us a little bit about you.
Most of my career has been in the construction industry, starting when I was right out of high school at 18 years old working for a GC, and throughout my career, I've worked in different areas of the construction industry. About 20 months ago, I joined Forge Building Company, started learning about self-storage, and just absolutely fell in love with it. I have mainly worked on commercial construction and a lot of federal projects.
If someone wants to build a project from scratch, what would be the step-by-step that person would have to take, from who do they have to contact first, all the way to the team that they need to work with until completion?
The first thing you're going to need is a piece of land. When you start looking for that perfect piece of land in the right place that allows you to build, you can narrow down specific markets that you know that there is demand for, that they're growing, and you can see that there isn't a lot of inventory in those areas. Start diving into a property that are available in those areas. The other route is to start looking for pieces of property within a market or an area that you typically are close to or that you have a special interest in. When you do it that way, you have to really understand the market and know if there is demand. For instance, I live in Boise, Idaho, and if I wanted to build in an area in which I lived in, I would know that I would be competing heavily against new construction and a lot of self-storage development in this area. You have to take that into consideration when you're looking for that parcel, or that piece of land.
Once you find that piece of land, you're going to start digging into what the entitlement process is going to be. First and foremost, look at that planning and zoning, or how is it zoned, and one of the biggest things that I'll tell people is do not assume that just because it is zoned commercial or business or light industrial, it means that you can put self-storage there, you need to dig a little bit deeper and find out what the acceptable land use is for that piece of property. The last thing you want to do is go into an agreement, purchase a piece of property, and find out that you cannot build on that parcel, and you may have to go through a rezoning process, which could take six to 12 months. You may have to get a special use permit or a conditional use permit. It's really important to find out what is the acceptable use of land.
Once you see what the parcel is and what it sounds like, you're going to identify what jurisdiction has authority, whether it's a city, the county, or a township, and then you're going to start talking to them, to see what is the approval process in order to build on this piece of property and to find out how they feel about self-storage. If you're going into a municipality that has a really bad taste in their mouth about storage, they're going to put up every hurdle they possibly can because they don't want you to build self-storage and so, that is something to be taken into consideration when you are looking at that piece of property and before you close on.
Do you have any horror cities that you have worked with in the past?
We have a couple. I was working with some developers that were looking to build specifically in Canyon County here locally. And because of what they were wanting to develop on their piece of property, they were going to have to have an office, which means that they were going to have to have water run to the site. It was in the county, however, it was on the path of being annexed into the city and so the county said "Well, we're not really interested in jumping through all these hoops to get you water, we just want you to wait until you're annexed into the city." And so that basically put them on a path of "wait", you don't know exactly when that's going to happen, what if they say, that'll happen within one to two years? That's not a very good feeling when you're wanting to go into contract on a piece of land.
Did that end up happening or not?
They are looking at ways of getting around bringing the water to the site and so we are changing the phasing approach on that development to possibly develop the buildings that are in the back first (that aren't going to necessarily require water) and that they're not going to have an office on-site so that they can start utilizing that property, getting some income rolling in before they are building that storefront in the front of the property that is going to require that water. They're basically buying some time.
Until now in the process, is there a particular person that could take on all of this work for you, is that the architect, or engineer that could do all of these steps up until now?
I highly recommend working with an architect. However, before you start going too far down that entitlement process, I highly recommend going into a market feasibility study and looking at the site layout to see if the numbers are going to pencil. Looking to see if there's demand in that area, how much can you potentially develop on that piece of property to give you the income that you're looking for, if all of those numbers come out favorable, then start going towards that entitlement process. When you start doing this entitlement, you're going to start talking with the city, you're going to have planning meetings, you need to engage in a civil to show what the topography is of the land and what you may have to do for drainage. That's when I would highly recommend bringing in an architect because they are subject matter experts when it comes to that, and they understand the vernacular and the words that need to be used when they are working with the city or the county. If you can find it architect that is familiar with that jurisdiction, they're going to know the key players and they're going to know what hurdles that are potentially going to be there because they've gone through it before on other projects.
Let's say you do get it entitled, who should you start working with at that point?
You have your property entitled and the next phase is what I would call the design phase. That's when you are going to have your civil engineer, your architect is going to start working on elevations, and a lot of the details of the building. If the jurisdiction has design requirements, that is going to be working up those architectural drawings to show that you're meeting the design requirements of that municipality. For instance, let's say that on the street front, they don't want to see any of the metal paneling, in that case, you're going to have to look at other exterior finishes such as stucco, Splitface, veneer, and CMU, and they're probably going to want it to be aesthetically pleasing. If you're in an environment where they have very strict design elements that they want, for instance, to say that they want it to match the feel and the look of the rest of the city, then that architect is going to understand what elements to put into the construction documents. That's basically what you're doing during the design phase, you are building the construction documents that are going to give the subcontractors or the trades that are going to be working on this project, it's going to give them all the very specific details of what they need to bid on the project and what will be executed during the time of construction.
And it's in this stage that companies like yours will be in that part of that planning?
Yes, absolutely. The three main players that are a part of the design phase are the architect, the civil engineer, and the structural engineer. At Forge, we're a design-build company so we provide structural engineering on projects, from single-story to multi-story to canopies, we provide that structural engineering piece. One of the reasons that it's so important to pull us in during this design phase is that we can provide insight to the architect to make the building as efficient as possible for the construction. For instance, the way that you lay out your units in conjunction with the way that the roof is framed is going to minimize how much steel you're going to use during that development of the project. When we can come in, I can take a look at a plan set right away and say, "We have the aisles running in the wrong direction. We can build it this way, but there's going to be so many more headers and steel beams than what we absolutely need. If we change the orientation of the hallways to go the opposite direction, it is going to be the most cost-effective approach to building that building.
Who would be responsible for getting quotes from all of the vendors, the GC?
The GC, the construction management company. If somebody is thinking that they're going to take it on themselves and be their own GC, I'm always very cautious about that because if you're just going to do an expansion, maybe it's just one building and you're expanding on an already existing facility, and you've done it before, great. If it's a full development of a facility, there is a lot of construction management that goes in. You are going to have a dozen different trades, and every one of those trades is going to go into a legally binding contract with you. Not only that, you are going to have to be responsible for budget, timelines, progress payments, and insurance, there is so much to manage. I always recommend going with a construction management company or a GC that has experience with self-storage and then they can provide that piece of management that is needed for the development.
Once you have your construction documents put together, usually you're going to want at least a 75% completion of those construction documents, which you're trying to get to the 100% because you want to take those construction documents and get them into permitting. Permitting with the different jurisdictions is going to take different amounts of time, as you're doing this development, time is always of the essence, you're trying to get through it as quickly as possible. While those construction documents are being finished up, the last 25%, the GC, or the construction management company, can take those documents and send them out to the different trades and subs, start gathering those preliminary numbers from those trades, and put together that budget.
There are things that will go wrong at any given time, what are some of the main things regarding legal to keep in mind when negotiating with anyone?
This one is kind of tricky because I can look at it from the subcontractor point of view, which is typically where Forge is, we are the steel contractor, then there is the GC's point of view looking out for their best interest, and then there's the owner that's looking out for their best interests.
If I offer a product, it has to perform and somebody paid for that to perform, what is fair where there's a win-win for everybody?
When it really comes down to it, there are some key parts of any contract, time is really important, wanting to know how quickly you can get the project done, and what obligations each person is going to have for those. Having realistic expectations is important. I've seen this in projects where the GC really wants this job, and they'll say, "Yeah, we can get the project done in nine months." And now all of a sudden, that owner has that expectation of nine months. Well, as you start working with all the subs, it may not be that and so I really encourage owners to have realistic expectations and say, "Okay, I understand that that is maybe the best-case scenario, give me the worst-case scenario. And ask, what are some things that could go wrong in the timeline of construction? Or if you are on the flip side, let's say a contractor comes back and say, "Okay, it's going to take us 12 months to get this done." Okay, can you give me a sequence of work? And then once you have that sequence of work, you can go back to the GC and say, "Is there any way we can be more efficient with this? Can you go back to your trades? And is there any way that we could figure out a way to get three weeks off or four weeks off?" I think that one of the biggest things, when you start looking at the contracts, is the timelines.
Then, the contractual amounts, when are you going to be paid?
Insurance is a really big thing, making sure that the GC has the correct general liability and builder's risk insurance, and that they are also making sure that all of their subs have it. One of the biggest things is safety. Is it a GC that values a safe working environment? And are they holding their subs to the exact same requirements of making sure that they have a safety program in place, and that they have a way of enforcing it?
Are there any other best practices for the construction of self storage?
Working with a team that understands self storage is going to be the best practice you can have. You may know an architect, and I see this quite often I have a lot of people coming into this industry and I talk to a lot of those people that have been in multi-family construction, or they've been in residential or even commercial construction and they say, "I have an architect that I use all the time." And my first question is, are they familiar with self storage because building self storage is not necessarily complex, but it is different and you need to have the people in your team that understand self storage itself. And so, I would say the biggest best practice is engaging with those and building your team that understands what you're building.
If someone doesn't live in a particular area that they are building, how should they make sure that they're not getting overcharged for any of the items?
Let's say, you've built a relationship with the GC and by this time, you've vetted them out and you've probably gotten competitive bids. The next thing to do is to get competitive bids for each of the trades and to make sure that they're bidding apples to apples. The construction documents should make it very clear what each individual should be bidding but there are times you need to dig a little deeper, having a GC or a construction manager that really understands how to go through those bids and make sure that it's apples to apples, once you get to that, you're going to look at what is the best price. Let's say that there's a huge discrepancy, that does not necessarily mean go with the lowest number because there is a possibility that somebody may have missed something, or that there could be a change order coming down the road. Looking at those numbers, let's say you got three of them, two of them are within reason of each other, that's a pretty good indicator that that's probably a fair number. Now, if you get three bids, and they're all over the place, that's usually an indication that they're not bidding the same thing.
Are there any specific best practices for the construction of RV and boat storage?
The biggest thing is making sure that you have an adequate amount of drive aisle. People that are driving these 40-foot Class A RV's need to have enough room to get into either the enclosed boat and RV or into the canopy-only space. When you angle your spaces, it does make it so that you don't have to have as much of a drive aisle. The typical rule of thumb is, say it's perpendicular to the drive aisle, and it's a 40-foot space, I would say no less than 50 feet for that drive aisle, 55 would be even better. If you angle it at 60 degrees, you are looking at possibly even a 40-foot drive aisle or if you had to, you could go down to that 35-foot. And then of course, if you go to that 45-degree angle, you're going to probably need 40-45 feet.
RVs have things that they need to dump, do all RV storage must provide that, or would it be okay to not have it?
It depends on what kind of boat and RV facility you're providing. We see plenty that have canopy only and don't provide a dump and wash station. A Class A facility most likely is going to provide that amenity because it is catering to those that are willing to pay more in rent because it is a Class A and it does have those extra bells and whistles.
Is there anything else that we have not covered that you think is important for our audience to know?
What it really comes down to is working with those that are subject matter experts, that are able to be a resource to you in several different facets, and working with those that have experience in self-storage.
Melissa Anderson
(208) 286-8928
manderson@forgebuildings.com
www.forgebuildings.com