A Good Year for Wine Storage
Copyright 2014 by Virgo Publishing.
By: George McCord
Posted on: 10/01/2005



 

Wine storage can be a terrific ancillary service for self-storage facilities in the right markets. It produces a greater return per square foot than traditional storage and generates a host of other benefits, including added revenue and marketing advantages. Wine storage helps enhance a property’s image and draws a specific category of clientele. It has also been shown to draw customers who would not otherwise have visited a storage facility; about one-half of those who rent wine storage will eventually rent traditional units too.

Is There a Market?

Unlike other amenities, wine storage is not practical for most self-storage operators. It requires specific market characteristics to be successful. For example, wine storage works well in urban markets, particularly those with concentrations of condos and apartments, which normally have limited storage. It also succeeds in areas that lack basements or regions especially high in temperature and humidity. Other good targets include vacation and resort areas, where wine-loving visitors may need a place to store their collections.

Local wine merchants are a great source of information about an area’s potential market, as they are constantly in contact with the wine-drinking public and know of customers who may have inquired about bulk storage. Merchants can be continuing sources of referrals as well as participants in a storage facility’s marketing events, such as wine-tastings.

For a quantitative look at a local market, seek out companies that provide demographic information or feasibility studies. They should be able to include a module that measures wine consumption in an area. No matter what resources you use, make sure there’s a need for wine storage in the community before creating this ancillary service.

Facility Design

Once you know a market exists for wine storage, your level of service can vary, as will facility design. You can simply designate a portion of your regular climate-control space for wine storage, maintaining a communal room at ideal temperature and humidity levels and allowing access only in the presence of a manager. Or, the more preferred course is to create a separate wine area with individual lockers and a dedicated refrigeration system. Ultimately, the level of sophistication will be determined by the local market, the facility’s general character, and the desired business image.

To create dedicated, full-service wine storage, there are several basic standards to keep in mind. First, it must be designed and constructed to maintain ideal conditions for wine: 55 degrees in temperature and 70 percent humidity. Preferably, you’ll want two refrigeration units to create a redundant system that will preserve conditions in the event one of the units fails. A backup generator should be used in the case of a power failure. This will be a significant marketing tool.

You’ll also want to include remote controls that enable customers to read cellar conditions from the rental office. Use measuring equipment to provide a history of the wine room’s temperature and humidity. This will generate a provenance for collector and investor customers as to the conditions under which their wine has been stored.

The lockers should be designed to accommodate cases of wine. Although it may vary in size, an average cardboard case fits in a 12-by-12-inch space, so use this dimension as your primary building block. For example, a 24-by-24-inch locker will hold four cases, while a 24-by- 90-inch locker holds 24. You can use a mix of locker sizes depending on the size of your storage area and anticipated market demand.

The lockers can be constructed from a number of materials. They range includes simple plywood boxes, cages of wooden slats, elaborate oak lockers with louvered doors, or any combination thereof. Recently, some suppliers have begun producing stainless-steel lockers. While they don’t match the traditional look of wine storage, the resulting effect is quite dramatic and has been well received by customers.


Stainless-steel lockers at USA Stor-A-Way in Naples, Fla., while not the traditional choice for wine storage, offer a clean, contemporary look popular with customers.

Security

A well-designed wine-storage area allows access to wine customers only. Use an electronic keypad at the door and assign each customer an individual access code. Fit the room with video-surveillance cameras and integrate them with the facility’s general monitoring system.

In addition, the temperature and humidity controls for the refrigeration units should be monitored and tied to an alarm system. If levels should ever exceed preset limits, the facility manager will be alerted. When the facility is closed, the system can be monitored by an outside service that notifies the manager and an HVAC technician.

Aesthetic Treatments

While ideal conditions of temperature and humidity are the linchpin of the wine-storage service, aesthetics will greatly enhance its marketability and appeal. The most basic decor will include an attractive entry door that makes the room’s purpose clear to customers. For example, at Plantation Self Storage in Bluffton, S.C., the wine room features a hand-carved mahogany door designed in a wine motif.


Plantation Self Storage announces its wine area with a hand-carved mahogany door and creatively painted walls.

The room’s exterior walls, visible from the rental office, have been faux painted to give the appearance of an outdoor winery. At East Bank Self Storage in Chicago, where the facility’s wine storage is in the basement, the open staircase descending to the wine room is decorated with old barrels and murals depicting scenes of wine country. Murals are a great way to dress up the area, inside and out, and they can be used to create the illusion of depth and size.


Decorative wine-storage murals at East Bank Self Storage in Chicago.

Marketing, Amenities and Services

The marketing program for wine storage should include a brochure separate from that of the general storage facility and may even incorporate a unique name and logo. For example, Plantation Self Storage refers to its wine storage as “Plantation Cellars” and has created a separate brand identity. Annie’s Attic in San Francisco calls its wine-storage facilities “La Cave.”

Additional amenities can bolster customer service and marketability. Perhaps the most valuable service to offer from a standpoint of business development and marketing is a program of periodic wine-tasting, which can be conducted by a local wine merchant who will refer his customers to attend. Not only does it attract potential customers to the site, it enhances the experience for existing clients.

Strong Box Self Storage in Chicago has a tasting room adjacent to the wine-storage area that includes booths and tables for people to relax and bulletin boards full of wine-related information. The facility hosts its own wine club, established among wine-storage customers. Members can participate in bulk purchases of wine, glassware and accessories at volume discounts. Strong Box also sells wine products and accessories in its retail area. Bottle-stoppers and corkscrews imprinted with a facility’s name and logo are handy and make great advertisements.

A particularly useful service is the acceptance of wine deliveries for customers, including purchases sent directly from wineries. Restrictions on the interstate shipment of wine have recently been lifted after extensive court battles. Although rules still apply in some states, most allow direct shipment. This opens possibilities for wine consumers—and storage operators who will use delivery acceptance as a marketing edge.

Costs and Returns

The chief question a self-storage operator asks when contemplating the addition of wine storage is: How much will it cost me? The next question usually revolves around how much money he can make. The accompanying charts show a sample of construction costs and potential income based on the Plantation Cellars facility mentioned earlier.

As you can see, construction costs total out at approximately $70,000. With a total case capacity of 2,032 and a rental rate of $1.50 per case per month, annual income could be as much as $36,576. Assuming a 10 percent vacancy rate, however, net annual income looks closer to $32,918, or 51.44 per square foot. In the right market, the wine-storage area pays for itself in little more than two years and then makes a nice profit center.

Wine storage is not suitable for every self-storage facility; but in the proper market, it can provide additional revenue and marketing benefits far in excess of costs.An attorney by trade, George McCord has more than 30 years of experience in a wide range of real estate and development projects.

He has supervised the acquisition, financing, construction, syndication, marketing and management of apartments, office buildings, resorts, shopping centers, residential and industrial subdivisions, condos, marinas and self-storage. He recently developed nearly 1 million square feet of storage, and his Plantation Self Storage facilities in Bluffton and Lexington, S.C., have been the winners of “Facility of the Year” awards. Mr. McCord is a member of the Self Storage Association, serving on the board of directors, and a founding member of South Carolina Self Storage Association. He is also a frequent speaker and participant in self-storage educational programs. For more information, e-mail gkm@sestorage.com.