Size is everything
I was reviewing a feasibility study last week for a new storage facility in Florida,
And buried in the unit mix spreadsheet, something jumped off the screen at me:
10×10 units: 31% of the total mix (the highest percentage)
10×30 units: 0%
Zero.
Not a single 10×30 unit in the entire facility.
This is standard across the industry, by the way.
Everyone’s building 10×10 units. It’s what developers call “the bread and butter size.”
But here’s what the pricing data showed:
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10×10 unit: $219/month
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10×30 unit: $266/month
On the surface, the 10×10 looks better.
It generates $2.19 per square foot.
The 10×30 only generates $0.89 per square foot.
So obviously the 10×10 is more profitable, right?
Not so fast.
If you’re building (or expanding), there’s a piece of context you’re probably missing…
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Construction costs don’t scale linearly with unit size.
A 10×30 unit doesn’t cost 3x as much to build as a 10×10.
And that’s because you’re paying for:
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1 door (not 3)
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1 set of walls (not 3)
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1 lock system (not 3)
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1 unit to manage (not 3)
To put it another way:
More small units = higher construction cost per square foot.
But it goes deeper:
Operating costs follow the same pattern.
Think about it from an operations perspective:
Auction expense (for delinquent units), administrative fees. lock and merchandise sales, door maintenance and repairs, unit turnover management…
Every single cost. scales with NUMBER OF UNITS, not square footage.
So when you build three 10×10 units instead of one 10×30 unit:
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You collect $657/month (3 × $219) vs. $266/month
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You manage 3 units instead of 1
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You pay to build 3 units instead of 1
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You process 3 rental agreements instead of 1
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You handle 3x the turnover
REVENUE might be higher, but you’ll need to look closer to see if the math works in your specific circumstance.
This is why I focus on financing strategy, not just deal analysis.
Because when I’m presenting a deal to a lender, they care about:
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Debt service coverage ratio
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Operating expense ratio
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Net operating income
And a facility with larger units can show:
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Lower operating costs (fewer units to manage)
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Higher profit margins (lower cost per sq ft to build and operate)
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More attractive NOI (even with lower gross revenue)
Now, I’m NOT telling you to go build a facility with only 10×30 units.
That would be terrible advice.
What I’m showing you is how to THINK about unit economics beyond the obvious surface-level metrics.
Because the investors who understand the difference between revenue per square foot vs. profit per square foot…
…are the ones who structure deals that lenders love.
And deals that lenders love get better terms.
Here’s to your success,
Cody