Important Do's and Dont's of Self-Storage Site Design and Unit Mix
Copyright 2014 by Virgo Publishing.
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Posted on: 08/01/2012



 

Site design and unit mix are two of the most important aspects of self-storage development. Creating too many units can leave a facility struggling to fill, while too few equates to lost revenue. This article identifies key considerations for building a successful self-storage project, and decisions that must be made before construction begins.

Design can make or break a self-storage project. While not quite as important as the facility location or management, it’s still critical. Developers make design decisions that can have a dramatic impact on the asset value. One of the most critical design elements is unit mix, which can dictate a project's financial future. These factors can be equally important in the acquisition of existing projects as the development of new ones.

The Identity Crisis

Sometimes design elements are not within the owner’s control. In an attempt to make self-storage more neighbor-friendly—and to permit storage as a land use when regarded as an industrial one—municipalities will use architectural controls and approvals to disguise self-storage as something else. This sometimes allows a facility to appear in retail or commercial zones.

Are we winning the battle but losing the war? If a project suffers from an identity crisis, the municipality may have achieved its desired outcome (self-storage as a permitted use), but only because the consumer doesn’t think it looks like storage project.

Is it even a battle won? Often, the “masking” of the use is very expensive and can dramatically lower the expected financial return because of increased costs in meeting architectural standards. Unfortunately, that may be only half of the problem. The other issue is now that the project doesn’t look like a self-storage facility, how does the consumer identify its use?

In the absence of rows of buildings with brightly colored roll-up doors, the cost of overcoming the identity crisis will be lost revenue as the result of slower lease-up and discounting to motivate consumers to seek and find. This, coupled with increased advertising and marketing costs, can add up to economic disappointment.

The flip side is because storage was permitted in an area where it was previously not allowed, you may have a strong enough market to transcend the identity issue. If increased costs can be overcome by increased rents, then the battle and the war are both won! This would dictate that the site location is extremely strong, with strong demographics.

Mixing Up Unit Sizes

It’s difficult to predict exactly what size spaces should be built. You might get it right at the outset and then the market shifts. Fortunately, most developers are in touch with their market attributes and can create a unit mix that’s site-efficient and meets consumer needs.

Take, for example, a dense urban setting, such as Manhattan, where the average unit size might be less than 60 square feet, with a predominance of 5-by-10s and 5-by-5s. In New York City, the consumer is rarely storing large equipment such as riding mowers in the winter and snow plows in the summer. In a more rural setting, such as Minot, N.D., the unit size may be a 12-by-25 or larger to accommodate everything from toys to tools.

The laws of development and land use also create a natural dictation of unit mix based on land costs, size and availability. It would be difficult to find five acres in Manhattan to store farm equipment, and if you did, it would have to be pretty pricey space. This is where market forces meet reality and tend to sync up.
The trick is accommodating projects in the middle of the spectrum. Again, start with your customers and what they need to store. College students need less space than contractors. A neighborhood with 1,200-square-foot homes creates different storage needs than 3,500-square-footers with three-car garages. Here are some of the key demographic drivers to determine average unit size:

  • Average age
  • Population density
  • Mobility/transience
  • Median home value
  • Median home size
  • Median and average household and per-capita income
  • Family/household size
  • Daytime population
  • Number of business establishments

These demographic drivers can influence a developer's unit-mix decisions. The combination of commercial vs. consumer targets will also influence the mix, with commercial users tending to require larger space.

Learn From Others

There’s no substitute for experience, whether your own or that of a hired gun. If you don’t have time to flatten the learning curve, get help from professionals who already have. Don't waste your time on civil engineers or architects for whom this is the first (or third) rodeo. If you don't have the experience and expertise, avoid the novice and hire someone with a proven track record.

Learn from those who have paid tuition at Life University. Don’t think for a moment that the top operators haven’t made a few mistakes and a lot more good decisions than bad to get them where they are today. If this is your first project, you can copy the guy with one project under his belt, who probably made a few mistakes all on his own, or follow the path more traveled and learn from the pros.

Look at their projects and use the same professionals they use, and you’ll benefit from their experience. Let’s use the manager apartment as an example. What are the big guys doing today? Many of them no longer spec apartments. It’s like putting the office behind the gate. This is pretty simple stuff, and you can benefit from these design standards.

The Sinatra Syndrome

The only thing more astounding than the developer who goes it on his own is the one who pays professionals for advice and then goes against their recommendations. It’s interesting how much more a project can cost when you have to make field corrections or you miss opportunities.

Design the project for operational efficiency. Keep in mind you only build it once, but you have to operate it every day. Look at design standards, all the way through the process, from design specs through the first 20 years and beyond.

You may think you can't afford to hire the same architect as a top operator, but the lessons you will learn are extremely valuable. How can you afford not to visit a large operator's last few projects to learn from its experience? The real estate investment trusts and major operators have a pretty good track record. Look at every aspect, from placement of the guest-services area to the location of motion-sensor lights in the hallways. How do they seal the floors? What size are the elevators? How are the buildings organized?

You Get What You Pay For

When considering development advice, realize you get what you pay for. It costs more to fly First Class, but the journey may well be worth the expense. A third-party management company that has developed a few hundred sites may offer design and construction-management services to help you right from the beginning. It may be appropriate to bring the company into the process during the design stage so it can help you choose seasoned professionals and avoid costly mistakes.

Be cautious about taking advice from those who have a vested interest in your project. A metal-building manufacturer may encourage you to build because it can sell you steel, not because the site is right or the project feasible. Once built, the vendor gets paid, and on to the next owner and project. Its success is not dependent on yours. It doesn't have to operate the project or see you to profitability. Keep in mind a vendor could be supplying materials to your job and one across the street.

Start With the End in Mind

Who’s the natural buyer for this project if you sell? Have you designed with potential buyers in mind?Design decisions can have a much larger impact on a future sale than you think, from total net rentable square footage to roofing materials to door color. The desired sale outcome may be a driving factor even before the site is chosen.

The size of the parcel, location, barriers to entry and architectural treatments may affect your ultimate capitalization rate. These decisions play an important part in the predicted and actual return on investment, which may ultimately change your decision to move forward with the project.

Consider the percentage of climate-controlled space within the project, which may determine its ability to reach stabilized occupancy within the pro forma. Keep in mind every site, project, market and outcome is unique. What works on Main Street might not work on Second Street. Each and every site is as individual as the markets it serves.

It’s a good practice to conduct thorough research, document the process, create several “bailout” points and work toward the best project possible. Ultimately you want a self-storage project that will ensure best practices in operation by design, not default.

RK Kliebenstein is the vice president of business development at Metro Storage LLC, which owns, manages and develops self-storage properties throughout the United States with more than 6.5 million square feet of self-storage in 13 states and more than 100 projects under its management control. For more information, call 847.235.8965; e-mail rk@metrostorage.com; visit www.metrostoragecorporate.com.

Determining the Best Average Unit Size

There are several considerations to make when it comes to determining your average unit size. Here are some of the demographic categories and how they may influence your unit-mix decisions:

Age. Younger populations such as college students tend to use smaller spaces (unless they store as groups and not individuals). The elderly, after the final home move, may also tend to use small spaces, where median-age families will use the most space.

Density. The more dense the population and housing, the smaller the average unit size. In most cases, dense urban storage is also more expensive per square foot, driving storage economy and unit downsizing.
Mobility/transience. The more you move, the less you move! The more times a family moves, the more it tends to scale down what it stores. So for the more transient populations, look for smaller average sizes.
Median-home value and size. Lower value, less stuff! This is more of an economic necessity, but lower home values typically mean less square footage and, thus, less stuff.

Median and average household and per capita income. This is the most economyinfluenced driver. Those with less income may accumulate fewer items to overflow the dwelling (garage, attic, basement, closets, etc.).

Family/household size. This is an interesting influence because the demographics have to be more closely matched to the actual geography. If households are combining, then larger average sizes may be used. If it’s strictly a matter of household size, economic pressure may dictate less spending for items that don’t fit in the swelling space.

Daytime population. Daytime population may indicate there’s heavy commuter traffic influencing the unit-mix decision. Commuters may be more likely to store larger quantities (use larger spaces) nearer their homes than their place of employment. A large daytime population may call for smaller sizes.

Number of business establishments. This is the Census tabulation of businesses. When the daytime population is divided by the number of establishments, it tells you the average size of the business. Very large commercial tenants may have their own warehouses and not as much need for self-storage. Contractors are the predominate user of commercially occupied large spaces in locations, with ambient drive-up space tending to increase average unit sizes.

Some of the decision is just common sense. If you have multi-level climate-controlled facility, you tend to offer a smaller average size. It’s more difficult for a customer to fill a 10-by-25 if everything he stores has to go on a cart, through a vestibule, into an elevator, down a hallway, into a space and off a cart.

Think about storing a fridge, washer/dryer and king-size mattress. Drive-up space seems to be much easier!