Two years ago, Fargo, ND-based Five Star Services bought a self-storage development site across the state in the booming town of Dickinson. At the time, Dickinson was one of the fastest-growing places in the U.S.
Now, however, a major slump in oil prices is slamming the brakes on the region’s growth. Five Star is undaunted, though.
Earlier this month, Five Star started to pour concrete for its latest storage facility at 430 29th St. (artist’s rendering at top), just as the number of operating wells in the Oil Patch region dropped from a mid-2012 peak of more than 200 to just 91.
There is still a lot of mom-and-pop feel within our company.
— Ben Hendricks, vice president of Five Star Services
Against the backdrop of falling oil prices, the construction timing might seem less than optimal, but Five Star Vice President Ben Hendricks said his company isn’t pinning the success of the new facility on the promise of economic growth.
“We knew the current population there needed more storage, especially more Class A storage,” Hendricks said.
The facility will operate under the name Badlands Storage. It’s set to open this summer.
Stable and sustainable
Dickinson reached a population of 30,372 in 2014, a 7 percent rise from 2013 — the second-largest growth rate among cities with 10,000 to 50,000 residents, according to the U.S. Census Bureau. Nearby Williston was the fastest-growing “micropolitan” area, with a population increase of 8.7 percent during the same period.
“We felt Dickinson seemed more stable and sustainable in the long term compared to other markets in western North Dakota,” said Hendricks, noting that the city has an airport and is home to Dickinson State University.
A 2008 breakthrough in hydraulic fracturing (“fracking”) and drilling techniques gave energy companies a way to more efficiently extract crude oil from western North Dakota’s Bakken Shale. The discovery led to explosive growth in Dickinson and nearby cities like Williston and Minot, with blue-collar workers flocking to the region for high-paying jobs in the energy sector.
Hendricks said Five Star first started exploring development of a facility in the booming Bakken Shale region more than three years ago.
Plan for Badlands
The first phase of Badlands Storage will cover 2.5 acres of a 6-acre site. The initial buildings of the gated drive-up facility will total 40,325 square feet.
Five Star also is building an on-site rental office and a two-bedroom manager’s residence. Hendricks said an on-site residence is needed because the oil boom has dramatically inflated apartment prices in the area.
Apartment prices aren’t the only thing inflated in Dickinson. Hendricks said his company is bringing in electricians and plumbers from Fargo to help hold down construction costs, as laborers in Dickinson tend to be higher-priced.
Once the second phase is completed, the facility will cover 100,000 square feet and offer up to 700 units.
Five Star’s start
Five Star operates nine facilities under various names, three of which are managed for third parties. Six facilities are in Fargo, one facility is in Grand Forks and two facilities are across the border in Minnesota. Hendricks said Badlands Storage in Dickinson will charge rents about 10 percent to 15 percent higher than the Fargo facilities do.
Hendricks’ grandfather formed the company in the 1970s with a focus on managing residential property. In 2004, the company was looking to build a new corporate office when it found a site in Fargo that featured four storage buildings.
That was Five Star’s first taste of storage. Since then, the company’s appetite has grown. “The returns of storage over commercial and residential leasing have been more sustainable,” Hendricks said.
In 2013, the company gave up 98 percent of its residential management contracts.
Fargo and beyond
Looking ahead, Five Star is looking to buy development sites and existing facilities — and not just those close to home, Hendricks said. The company recently bid on a facility in Mesa, AZ, although Five Star concentrates mostly on second-tier markets in the Upper Midwest.
“We are looking to become a bigger player in the industry. That is our long-term goal,” Hendricks said.
Hendricks, 30, said he has come to enjoy the self-storage industry and all the work that goes with it.
“You might have a meeting with a banker in the morning and then be out sweeping snow two hours later,” Hendricks said. “There is still a lot of mom-and-pop feel within our company.”
Photo of Ben Hendricks courtesy of WDAY.