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Construction Faces Inflation for Projects, Prices, Labor, Says AGC

Article-Construction Faces Inflation for Projects, Prices, Labor, Says AGC

Non-residential construction will experience wide variance in demand, materials cost and labor availability in 2008, according to the Construction Inflation Alert released today by the Associated General Contractors of America (AGC). The groups chief economist, Ken Simonson, says some non-residential segments will continue to grow, including power and energy, but others such as lodging will slow or decline. Diesel, copper and steel are among materials likely to increase in cost.
 
The large increase in diesel-fuel prices compared to a year ago, along with the importance of diesel fuel to highway construction, makes it likely that highway costs will go up even more. Conversely, the slumping demand and rising supply of gypsum products may mean non-residential and multi-unit residential building costs go up a little less than 6 percent.
 
"These cross-cutting trends make it likely that the PPI for construction inputs will accelerate from the 4.5 percent rate of increase that prevailed in 2006 and 2007 to a 6 percent to 8 percent range by the end of 2008," commented Simonson.
           
Looking beyond 2008, AGC says two factors make a sustained 6 percent to 8 percent growth rate for construction input prices likely. First, many construction inputs, such as diesel fuel, steel and copper, are in demand worldwide. Second, construction will always be dependent on physical delivery of heavy, bulky, relatively low-value materials for which transportation and fuel costs are a major part of the delivered price.
 
Labor accounts for roughly half the cost of a construction project. In 2007, despite the high level of non-residential activity, contractors were generally able to find enough workers, thanks to a massive redeployment of specialty trade contractors from residential to lighter non-residential projects.
 
"In 2008, I expect labor shortages will worsen for a few crafts, pulling average wage rates higher; but in other segments such as residential specialty trades, the supply of some crafts will be plentiful," noted Simonson. "Wage increases in non-residential construction may rise to the 4.5 percent to 5.5 percent range in 2008, despite the slowdown in overall activity, and to 5 percent to 6 percent in 2009, when residential work begins to compete again for some specialties."
 
The AGC is the largest and oldest construction trade association in the United States, representing 33,000 firms nationwide. For more information, visit www.agc.org. For a complete copy of the Construction Inflation Alert, visit www.agc.org/cia.

ISS Blog

Towns are getting ideas ... Scary sales tax!

Article-Towns are getting ideas ... Scary sales tax!

As much as we've all willed it into non-existence, the reality is now pretty clear: Self-storage sales tax could very well be coming to a city or state near you. The facility operators of Morton Grove, Ill., are learning that hard lesson just now, on the cusp of a March 10 meeting set to decide their fate.

With only three storage facilities in the village, the community still anticipates an additional $50,000 per year in revenue through the proposed 5% tax. But at least one owner says the tax could force him out of business. I don't know how Morton Grove thinks it will benefit from a storage tax if it drives all of its operators out of town. But it's not the first jurisdictionnor will it be the lastto see this trend developing throughout the country and get dollars signs in its eyes.

I posted a news item regarding this scenario to the ISS newsfeed earlier in the week. Not long after it went live, we received a comment from a reader who says Needles, Calif., is attempting to put into place a 10 percent self-storage sales tax. He was told that a prospective developer of 900 units pulled the plug on his project because the additional cost would make it unworkable.

I know what a few of you are wondering: If the levy is a sales tax to be paid by consumers, why do these operators feel it will cost them? If you think tenants are going to stand by and accept a substantial increase to their monthly rent, guess again. Your occupancies will suffer, or you will have to absorb some or all of this cost on their behalf. And nevermind trying to follow a course of prescribed rental-rate management and increases! That just won't happen after consumers get slapped with the tax.

So ... several things are now extremely, extremely important:

1. Make sure you are keeping well-informed of nationwide news regarding self-storage tax struggles in the individual states. Do not make the mistake of assuming that something happening half way across the country won't make its way to your doorstep overnight.

2. Support your state association. Seriously, folks ... This is not a plug to boost association membership. The fact is a well-supported and organized state association is your absolute best defense against a potential sales tax in your area. Your association needs financial and human resources to protect you, so pitch your dollar in the coffer and cover your assets.

3. Be prepared to make a stand. Participate in local and state legislative meetings. You'd be surprised what fates may be decided by a small group of locals eating donuts around a fold-up table in a community center somewhere. Do not underestimate the power of your voice and presence! Be around, be heard and be safe.

Thoughts on this? Hit the "Leave comment" link below and leave them here.

Keeping Your Business in Low-Risk Balance: Legal Issues & Insurance

White-paper-Keeping Your Business in Low-Risk Balance: Legal Issues & Insurance

With mainstream media and juries nationwide sympathizing with tenants who lose their goods to lien sale, it's more important than ever to protect your self-storage business. In addition to a sound rental agreement, you'll need to ensure you follow state statutes to the letter and follow a rigorous course of action when it comes to the sale. You'll also want to purchase appropriate insurance, including specialized coverage tailored to this business. This e-book outlines the critical components of the lien sale, addresses the basics of handling a lawsuit, and explains the unique risks involved in running storage facilities. You'll also read about the benefits of offering tenant insurance and tips for keeping out of legal trouble.

Morton Grove Faces Possible Self-Storage Sales Tax

Article-Morton Grove Faces Possible Self-Storage Sales Tax

On March 10, 7:30 p.m., the Village of Morton Grove, Ill., will discuss a proposed 5 percent sales tax to be levied on self-storage. Although the tax is to be paid by customers and collected by the towns three storage businesses, facility owners claim they are the ones who will ultimately pay.
 
Leading the charge in opposing the proposed tax is Christopher Barry, co-owner of LifeStorage Centers of Morton Grove, which opened in November 2007. The company has a total of 10 locations throughout Chicago and surrounding areas. Barry has sent a letter of appeal to Village Administrator Joseph Wade, who recommended the new tax during a budget review last summer.
 
Wade says self-storage facilities use large tracts of commercial property but generate no sales tax for the village. Officials estimate that the self-storage tax would create about $50,000 a year in new revenue.
 
Barry claims the tax could well put him out of business. He says the tax could put his facility at a disadvantage when compared to those in neighboring towns, where the storage tax is not levied. Even though the duty is supposed to be paid by customers, in reality, he says he will have to absorb that cost to remain competitive with storage businesses in nearby communities.
 
In addition, Barry opposes the levy because he says his facility pays extremely high property taxes; the tax is unconstitutional, singling out self-storage from many other business types; and LifeStorage has significantly improved what used to be a run-down property, giving the neighborhood a fresh look.
 
Adam Blair, general manager of the Morton Grove U-Haul storage facility, also opposes the tax.

Tennessee Self Storage Association Participates in ISS Nashville Expo

Article-Tennessee Self Storage Association Participates in ISS Nashville Expo

The Tennessee Self Storage Association (TSSA) will contribute to the planning of the Inside Self-Storage Expo in Nashville, Tenn., and will hold its quarterly meeting in conjunction with the show. The event will take place Oct. 7-10, 2008, at the Gaylord Opryland Resort and Convention Center, including educational seminars, networking opportunities and industry exhibits.
 
Were very pleased to have the Tennessee association involved in planning this regional industry event, said Troy Bix, publisher of Inside Self-Storage magazine, which hosts the expo. We now have two great industry associationsFlorida and Tennesseeon board for Nashville. We welcome any state association in the region to join us in hosting this surefire event.
 
Participating organizations are given free space to hold membership meetings and a package of complimentary member benefits. For more information, e-mail Teri Lanza, ISS business development manager, at [email protected].
 
The ISS Expo is dedicated to the needs of self-storage owners, operators, managers, investors, developers and suppliers. For information and to register, visit www.insideselfstorage.com/expo.

ISS Blog

The 'R' Word

Article-The 'R' Word

Well, it's being acknowledged: the R wordrecessionin referring to the U.S. economy. But not, it seems, domestically. The Herald Sun, published in Melbourne, Australia, had this headline yesterday: U.S. recession finally hits. On Feb. 29, an article in Globeandmail.com, the online news section of Canadas Globe and Mail, spoke about the downturn in the U.S. economy, claiming a recession is imminent. And yesterday, The Guardian, a U.K. newspaper, ran an article headlined, Dollar slides on grim U.S. economic outlook.
 
So, why do we not see much real discussion about the possibility of U.S. recession in this country? Headlines have been screaming for weeks about the beating the lending institutions have taken from the sub-prime debacle. The nation's largest mortgage holder, Countrywide Financial, was just rescued by Bank of America.
 
Thousands of people lured into buying mortgages beyond their means are facing foreclosure. They know they're in a recession.
 
But this blog is not all about doom and gloom. It seems the R word is generating a lot of the P wordprofitfor self-storage, as I found this heartening note in The Motley Fool. Public Storage has increased its dividend payout by 10 percent.

The Fool predicts the wave of foreclosures will cause homeowners downgrading to smaller homes to use self-storage facilities to house excess goods. So, maybe the R word does not apply to the self-storage industry. Lets hope not. Let me know your thoughts.

ISS Blog

Bright and Green Ideas

Article-Bright and Green Ideas

Last night, I attended our town meeting, in which we review and scrutinize all aspects of budgeting, from the recreation department to school finance, sewer payments and support of the senior center.
As a first-term member of the school board, Ive been initiated by fire to the whole budget processnumbered and encumbered, as I tend to think of it.

I cant even balance my checkbook, let alone a multimillion-dollar education account. But thats what were hired to do, and thats what we try to accomplish; all the while clipping corners and dollars at every chance we can, anticipating the scowls of penny-pinched and jaded elderly folk surviving on Social Security checks.

Why in Gods name would you pay thousands of dollars to replace all the light bulbs in the school if they were still good? one person asked while others grumbled. To save thousands more in the long run, answered the school -board chairman. You see, our school is going green, replacing all the ancient light tubes with energy-efficient bulbs. We save money and the environment benefits at the same time. Snap!

Seems like an easy trade off, but Im not sure how many folks are aware that the new compact fluorescent lamps use less energy, decreasing electric bills and saving 2,000 times their own weight in greenhouse gases.

At the recent ISS Expo in Vegas, several seminars drew large numbers of attendees to learn about green building. Many developers are doing their homework in anticipation of upcoming legislation; others want to do whats best for the environment and their bank accounts.

I recently came across another idea I thought worthy of passing on: reusing building materials. Several organizations have set up websites that act as online swap meets for construction materials of all types. Visit some like www.thereusepeople.org and www.builder2builder.com, or discover others on your own. Theyre something like free online classified ads for used building materials, offering tax benefits and keeping usable materials out of landfills.While our industry may be still green at going green, some of you might want to take your first baby steps at joining the revolution.

At the very least, consider switching out your bulbs to the energy-efficient, cost-efficient CFL options. Want to learn more? Log onto the Environmental Defense Fund at www.edf.org.

Buchanan Street Partners Hosts Encore for Education Charity Concert

Article-Buchanan Street Partners Hosts Encore for Education Charity Concert

Buchanan Street Partners, parent company of Buchanan Storage Capital (BSC), will host its second annual Encore for Education charity concert on June 12, 2008. The event benefits Buchanan Childrens Charities and the VH1 Save the Music Foundation, both 501c3 charities dedicated to enhancing the lives of children. It will feature a performance by popular musical partnership Crosby, Stills & Nash.
 
Encore for Education will take place at the House of Blues in Los Angeles at 9 p.m. (doors open at 7:30 p.m.). The event is co-sponsored by Arden Realty Inc., Bixby Land Co., Buchanan Street Partners and TCW. To purchase tickets or for information regarding sponsorship opportunities, contact Bobbie Garza at 949.219.1583 or [email protected].
 
VH1 Save the Music Foundation is committed to creating systemic change in the American public school system by restoring music programs and raising public awareness about the importance of music participation for our nations youth. Since 1997, the Foundation has provided nearly $40 million worth of new musical instruments to more than 1,500 schools, affecting the lives of more than 1 million children.
 
Buchanan Street Partners is a national real estate investment bank that provides real estate capital and advisory services for owners and developers and investment management for institutional and high-net-worth investors. The firm's advisory services include structured finance and investment sales for commercial, multi-family, and self-storage properties. BSC provides financial resources to self-storage owners nationwide. For more information, visit www.buchananstreet.com.

ISS Blog

Security Detail

Article-Security Detail

Last week, I began working on our June 2008 issue, our annual Security & Crime Prevention issue. Then this week, I came across this article on TheBostonChannel.com. Police are looking for a man who robbed two employees of Boston Self Storage. The man allegedly entered the facility brandishing a hand gun, then duct-taped the employees. He made off with their wallets, cell phones and $600 in cash.
 
I can see how a storage facility can seem like an easy target to the average thug looking for a quick payout. The front office is typically secluded and easily accessible. There are usually only one or two employees on duty at any given time during the day. And most would-be robbers know there will be some cash on hand.
 
But what few perpetrators may realize is more self-storage owners are taking steps to ensure the safety of their customers, employees and property. Digital video surveillance, restricted gate access, panic alarms, biometrics and electronic locks are being used at facilities big and small across the country. High-end security will not only attract a better clientele, it will also deter any baddies looking for a quick score from stepping foot on your property.
 
For more on security measures you can take today, check out the security section of the ISS article archive. If youve taken some interesting security measures, tell us about it. Just click on the "Leave Comment" link below or drop me an e-mail at [email protected].

Florida Association Sponsors Inside Self-Storage Nashville Expo

Article-Florida Association Sponsors Inside Self-Storage Nashville Expo

The Florida Self Storage Association (FSSA) will sponsor and support the Inside Self-Storage Expo in Nashville, Tenn., Oct. 7-10, 2008. The event, which will take place at the Gaylord Opryland Resort and Convention Center, will include four days of educational seminars, networking opportunities and industry exhibits. Open to self-storage professionals worldwide, it will feature a special focus on the Southeast Region of the United States.

The FSSA is pleased to be part of this event. We look forward to working with ISS on this and future opportunities that can bring additional educational, networking and other benefits to our members, said Linnea Appleby, president of PDQ Management Solutions, which manages the FSSA.   
 
Established in 1999, the FSSA has approximately 700 members throughout the state of Florida. Its aim is to ensure the stability and growth of the self-storage industry by providing a forum in which its members may access educational opportunities, exchange information and promote an established, unified voice.

We are thrilled to join forces with the Florida association in planning and promoting this regional industry event, said Troy Bix, publisher of Inside Self-Storage magazine, which hosts the expo. Not only will this arrangement allow us to tailor the educational program to the needs of local operators, but exhibitors can now attend just one tradeshow rather than two separate events. Its a winning situation for us all. 
  
The ISS Expo is dedicated to the needs of self-storage owners, operators, managers, investors, developers and suppliers. For information and to register, visit www.insideselfstorage.com/expo.

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