From the blog
How infill land cost shapes a development
Land is the input a developer can least control and the one that most determines whether an infill self-storage project works. Here is how it moves the arithmetic.
Every self-storage development pro forma has one input that cannot be revised after the fact. Construction pricing can be managed through design choices, phasing, and how the trades are bought. Lease-up can be pushed with marketing. Land cost is fixed at closing, and every subsequent decision has to work around it.
Land sets the rent the building must earn
The arithmetic runs backwards from income. A finished facility is worth its net operating income divided by the rate the market applies to that income. Total project cost — land, hard costs, soft costs, carry through lease-up — has to land below that value by enough margin to pay for the risk of getting there. Since land is the least compressible line, it effectively sets the rent the finished building must achieve.
This is why two developers can look at the same parcel and reach opposite conclusions honestly. One has a rate assumption the submarket supports; the other does not.
Expensive land is often the point
The instinct is to seek cheaper dirt, and for a first project it is a reasonable instinct. But cheap land is usually cheap because it is easy to acquire, and what is easy for you is easy for whoever comes next. A site chosen for price on a distant arterial invites a competitor to repeat your project closer to the customer a few years later, at which point your rate assumptions belong to them.
Land that is hard to assemble, hard to entitle, and hard to replace protects the income of the finished facility more durably than any operating advantage. You are buying scarcity as well as square footage, and scarcity is what still matters in year seven.
Entitlement risk is a land cost in disguise
A parcel's price is only part of what it costs. Time spent in entitlement is carry, professional fees, and the option value of capital that could have gone elsewhere. A site that takes eighteen months to entitle at a lower purchase price can easily cost more than one that takes six at a higher one, and the eighteen-month version also carries the risk of not being entitled at all.
We treat entitlement probability and duration as explicit inputs rather than optimistic footnotes, which sometimes means paying more for a site that is already zoned for the use.
Where this shows up in a return
Because land is fixed and income is achieved over time, the sensitivity that matters most is not construction cost but lease-up pace against the rent the land forced you to underwrite. A site bought correctly gives a slow lease-up somewhere to go; a site overpaid for turns an ordinary lease-up delay into a shortfall. That relationship between basis and execution is the substance of how we evaluate development and acquisitions.
Frequently asked questions
Why does land cost matter more than construction cost?
Construction pricing moves within a range a developer can partly manage through design, phasing, and procurement. Land is fixed the moment you close on it, and it cannot be value-engineered afterwards. An overpaid site cannot be rescued by building efficiently on it.
Why build on expensive infill land at all?
Because the same scarcity that makes the land expensive is what keeps the next competitor out. Cheap land on a distant arterial invites someone to do exactly what you just did, two miles closer to the customer, three years later. Difficulty of entry is an asset you are buying alongside the dirt.
How do you know when a site is too expensive?
Work backwards. Take achievable street rates for the submarket, apply an occupancy you can defend, subtract realistic operating costs, and see what value the resulting income supports. If total cost including land exceeds that, the site does not work at that price no matter how good the location feels.