NorthPoint Development is updating an industry, which it plans to dominate, with its new Beyond Self Storage facilities.
Founded in 2012, NorthPoint Development already has more than 21 million square feet of industrial, multifamily and senior-living development under its belt.
Now, the Riverside-based company has decided to tackle and dominate self-storage development with its new three-story, climate-controlled Beyond Self Storage facilities.
Ben Hagedorn, the brother of NorthPoint CEO Nathaniel Hagedorn, is leading the charge as director of self-storage operations.
Within the next 60 days, he said, NorthPoint will complete its first two self-storage construction projects, both in the St. Louis area. Two more are getting underway in the Minneapolis area, he told the Kansas City Business Journal, “and by the end of this year, our goal is to have 13 self-storage facilities built or under construction.”
“That’s how quickly we’ll be delivering these facilities — a little more than one every other month,” Hagedorn said, adding that NorthPoint doesn’t plan to lessen that pace anytime soon.
He said the firm now is looking in Chicago, Detroit, Pittsburgh, Tampa, Fla., and up and down the East Coast for more sites on which to build the new 100,000-square-foot self-storage facilities, which cost about $9 million each, not including land and soft costs.
NorthPoint is intent on eventually dominating the self-storage market nationwide with its new development model, Hagedorn added.
An unintentional new business
But it all started quite unintentionally with NorthPoint’s 2014 purchase of the former U.S. Safety headquarters building at 8101 Lenexa Drive in Lenexa. (That’s the structure sometimes known as “the Banana Building” due to a round tower portion that appears to be ringed by three-story-tall concrete banana peels).
“We had bought that for industrial purposes,” Hagedorn said, “but there was a mezzanine on the north side of the building that was really difficult to remove. So we put 600 self-storage units there and on the main floor on the north side. That’s how it got started actually.”
From there, NorthPoint used its development expertise to devise a new construction model that requires 2-acre, rather than 10-acre, sites so that it’s easier to win city approval for locations more desirable to users. In addition, the new Class A self-storage facilities allow users to do all their loading an unloading indoors and offer features such as elevators (for those with second- and third-floor spaces), state-of-the-art security, HVAC systems, even free Wi-Fi and conference rooms for tenants.
A morphing industry
In the past, Hagedorn said, “most of the growth in this space has happened through acquisitions, where you have mom-and-pop operators build a facility, lease it up and sell it.”
But with the self-storage market now topping $32 billion and growing at a 3.5 percent clip, self-storage construction over the past three years has tripled to more than $180 million a month, according to U.S. Census data.
“There’s a lot of new money coming into this market,” Hagedorn said. “But our response to that is that it’s all about the hyper-localized market that you buy in. You don’t have to find a tri-state area that works. You just have to find a three- or four-mile trade area that works.”
NorthPoint is using a sophisticated data-driven approach to identify those markets, Hagedorn said. But due to the stigma that lingers from years of sprawling, unattractive facilities in locations where no other uses would work, getting new Beyond Self Storage facilities approved is challenging, he said.
“The industry is shifting away from putting units in the middle of nowhere and expecting people to come to you,” Hagedorn said. “You have to be where the people are, make it convenient and easy, and provide a secure atmosphere and good service.
“It’s becoming an infill market, but maybe a municipality would rather have an office building, a hotel or apartments (in the self-storage locations NorthPoint identifies), so that’s a challenge.”
Overcoming that challenge appears worth the effort, however, because self-storage offers potentially greater returns than other commercial real estate investments, a less complex and risky construction process, and strong performance during economic lulls.
“It takes the best of industrial and the best of multifamily,” Hagedorn said. “You’ve got 700 tenants, so you’re not relying on one or two tenants. And if a tenant moves out, you don’t have to change carpet or paint the walls. It’s just a concrete box.”