Self-Storage Development Trends: Conversions and Multi-Story Building Lead the Way
|Copyright 2014 by Virgo Publishing.|
|By: Ben Burkhart|
|Posted on: 06/28/2010|
In this great industry, we mostly compete within a micro market. A store in California and a store in Florida are not competing on a daily basis with a store in Virginia. The business has matured at such a rate, however, that exploring national trends can be helpful in piecing together a competitive strategy to overcome and compete with the stores that strive to reach our same prospective tenants.
In this article, you’ll find some key trends in the industry as a framework for defining the “direction” of future self-storage development.
The developer who built that store in 1980 was the early innovator, laying the groundwork, and willing to risk mistakes for success.
From there, the industry began maturing by adopting newer technologies in management and security, studying tenants’ habits, adopting best practices borrowed from other industries, and attempting to perfect its approach to development and management. Originating with the risks taken by those early leaders, self-storage has flourished as a result of constant innovation.
What’s propelling new development trends? Customer demand. Your tenants want something clean, safe, secure, easy to access and dry. If you have good competitors, they’re trying to meet those demands. If you’re not doing things right, it opens up the door for a new store to come in and better serve your customers.
We know your tenant is dealing with some level of elevated stress simultaneous with needing storage. So your office, manager, systems, etc., must be professional and efficient. These considerations increase the cost of development, but they enhance the viability of the store from a sustainable economic perspective.
Using customer-demand traits as a guide, certain markets may have the opportunity to add additional services to their development. There is, and always should be, periodic buzz about “the next new thing.” Facilities with wine storage, mailboxes, shipping centers, band-rehearsal units, locker-style units, and other ancillary products or services have all had varying levels of success.
However, these may not be long-term development trends that work in every market. Kiosks also work in some storage, but may not in others. Likewise, management methods will vary. Some developers may build onsite housing, while others prefer managers to live off site. Developers should take a hard look at the needs in their market, and then find a way to meet those requirements.
As part of the feasibility process, developers must look at zoning and the buildable area of a parcel. Suitable land for ground-up development is harder to find today. Many zoning ordinances recognize self-storage as a particular type of use—perhaps a commercial zone, light industrial or industrial zone.
That 30-year-old store with beat-up doors, ugly colors, and weeds growing in the gravel driveways has prompted building and zoning officials to prevent additional ugly uses in prominent locations. Unfortunately, that dilapidated store down the street has set the expectations for what self-storage looks like.
However, a parcel zoned for industrial use might be in the right location and, at the same time, allow self-storage. Older industrial buildings are being converted into other uses including retail, apartments, condos, etc., as local industry has faded or relocated.
“We’re seeing more conversions,” says Terry Campbell, vice president of sales and marketing for BETCO Inc., a single-source manufacturer of self-storage buildings. “Often, the conversion projects are closer to the denser populations, and adding floors to a smaller development site moves the potential income up enough to justify the initially higher land costs.”
Conversion projects vary from simple to complex. Not all old industrial buildings are up to local building codes. Asbestos might be present. Ceilings might be too low. The structure of the building might not support self-storage use. Signage may be limited. Access might be hidden or difficult for the storage user. Demolition may reveal bigger-than-anticipated problems. All these factors must be explored and quantified as part of the development/adaptive reuse of a building to be converted.
Why many self-storage developers opt for multi-story is easily understandable: It gives them more rentable space on a smaller footprint of land. But when no other competitor in the market is multi-story, the consideration becomes more complex.
The risk of being the only multi-story in the market is absolutely one you must consider. However, if the market favors that type of development, it can give you an advantage. You should carefully analyze the supply and demand and site location, and obtain an accurate depiction of investment performance to determine if multi-story is right for your site.
Multi-story developments push up the per-square-foot cost of a project, but can maximize the rentable space on a smaller parcel. The key consideration after the financial-feasibility analysis is making the units easily accessible. Spacious covered loading and unloading zones, multiple elevators and efficient hallway design are crucial elements in a multi-story project.
If you’re considering the development of a new site, converting a building to self-storage, or renovating an older project, let your analysis of the market’s customer demand bear strong influence on your design and development process. Set out to do things right—from planning to development and management—and you’ll have a higher chance of success.