|Copyright 2014 by Virgo Publishing.|
|By: Patrick Farrell|
|Posted on: 01/01/2003|
A very attractive niche market for the self-storage business is the storage of boats and recreational vehicles (RV). While many self-storage operations have occasionally targeted boat and RV customers, their efforts have mostly been in the traditional, single-story approach. Perhaps the time has come for the developers of storage yards to look upward beyond the box to a very worthwhile investment.
An increasingly popular alternative method for storing boats is dry-stack storage. This involves the vertical storage of boats in rack systems that can store them with the same density-storage philosophy as in the warehouse industry. The underlying concept for dry-stack storage is to develop structures that can stack boats from two to six levels high. The predominant method of handling these boats is with large marina forklifts capable of lifting them to rather dramatic heights. These facilities are generally located on or near the waterfront. The systems are used for in-and-out launching and retrieval of boats, as well as winter storage.
There are many reasons for the increasing development of boat-storage facilities. The supply-and-demand equation for water access is the main driver for dry-stack storage. Boating has long been a source of recreation for many people; but in the past, it was often viewed as entertainment for the wealthy or other specific groups (i.e., fishermen). Boating has become far more attractive and attainable to a greater number of people in the last couple of decades. A combination of factors is responsible for this positive development, including:
This increase in boating popularity has resulted in a dramatic increase in the demand for water access, too. Many boat owners live in newer neighborhoods that have established covenants precluding the storage of boats on trailers at their homes. Other owners live in townhouse or condominium developments that have no space for boats. There is also a limited amount of wet slips available. Dry-stack boat storage is a logical answer to this increased demand.
Because the overall number of marinas is decreasing, not all dry-stack facilities are located at marina sites on the water. As the demand continues to exceed the available slips, off-water dry-stack facilities become attractive alternatives for boat owners. This is particularly the case for areas that have a high population of boats on trailers, which is also common in regions that offer multiple bodies of water for boating. In these areas, boaters may go to one lake one day, another lake the next, or the beach on yet another occasion. These boaters want flexibility in addition to storage for their vessels.
Even though traditional self-storage can provide some relief of this demand, it is limited to ground level. By using the marina forklift to handle boats, off-water sites can accommodate double, triple or even quadruple the quantity of stored boats as the ground-level storage lot. And these facilities can be constructed on land at a far more affordable price than premium waterfront property.
While it is admirable to address the issue of water access, what is the incentive for developers to do so? Well, just like any other commercial property, the dry-stack facility must provide an attractive return on capital investment (ROI). Let's take a look at some possible figures for pro forma analysis.
The capital investment in dry stack is similar to a typical self-storage operation. In fact, the two applications could be integrated, with self-storage on the ground level and boats stored in covered racks in upper levels. The cost to install and erect a dry-stack shed (based on at least 60 boats) will traditionally fall in the range of $2,000 to $2,400 per boat. This is a shed that has a roof with sheeted endwalls. The structure is open on the stern side of the boat, as the forklift picks the boats from the rear. The forklift to service the operation can be purchased on the used market anywhere between $30,000 and $50,000.
For illustration purposes, we'll assume we have a building lot measuring 150 feet wide by 160 feet long. Allowing for setbacks, we can erect two structures, each 25 feet deep by 120 feet long. We would like to construct our sheds to store boats up to four levels high, which will require a low-side eave height of 35 feet. These two sheds will provide total storage for up to 96 boats. Our capital investment in the sheds will be about $230,000 (96 boats at $2,400). For this example, we will assume the forklift will cost $45,000. The commercial property will cost $65,000. Engineering, architectural and miscellaneous site-improvement costs will be $25,000. Our total investment is $365,000.
Now we need to establish a storage fee. A reasonable rate, based on national averages of boats in dry-stack storage, would be $130 per month. This means the average customer will pay $1,560 annually to store his boat in our secured, convenient facility. We will assume our occupancy rate is 80 percent. The annual storage income we can anticipate is $120,120.
Obviously, we have other costs that need to be factored into the model. Unlike at a self-storage facility, we need a full-time (or on-call) forklift operator at the site, as customers must depend on someone to access their boat. We also have typical administrative costs, utilities, maintenance, insurance and taxes to consider. If these items total $65,000 (approximately 55 percent of revenues), we have an annual NOI (net operating income) of $55,120, before depreciation and debt service.
Of course, like any commercial facility, the axiom "location, location, location" will be crucial to the success of the boat-storage operation. If the site is in a good area with plenty of visibility, the occupancy rate should exceed 90 percent. If the project is marketed and managed well, the revenue stream can be even more positive than we have outlined in the example above.
From our illustration, it is easy to see the potential ROI in a dry-stack system is quite attractive, even if the facility is installed off the water. For those commercial-storage business owners who are willing to look upward, it can be a positive investment.
Patrick Farrell is the owner of Coastal Marine International Inc., a manufacturer of dry-stack boat-storage systems. The company has provided storage for more than 35,000 boats to marinas and storage operations throughout the world. For more information, call 704.948.6895 or visit www.boatracks.com.