By Jim Killoran
|Editor's Note: The following is excerpted from Self-Storage Startup, a manual for the development of self-storage properties. For order information, contact LeManx Information Products, P.O. Box 542, Shelton, WA 98584; (800) 764-1909.|
The topic of unit mix has probably caused more hand-wringing among facility owners than most other considerations involved in the development of a self-storage property. Why? Most likely it's because up until this point they've probably been dealing with factors of a larger, more conceptual nature.
Think about it. Through your feasibility study, you first determined that your market will support "x" additional square feet of storage; you were extremely cautious in your site selection and all the necessary but frustrating steps to ensure its viability to your eventual success. Then came the layout of the facility, where you eked out the last possible square foot of rentable spaces. But now you're at the point where the rubber meets the road, the point where you say, "OK, this is what I've determined that my customers will want to rent, so this is what I'll build."
But it's not as though you are holding a stack of signed, long-term leases in your hand as proof of the commitment of your customer base. Even though you have done the legwork to determine who your customers will be and what they will pay for, you still are just making an educated guess as to exactly what your unit mix should be.
We've all heard it said before that we need to learn by our mistakes. Instead of setting out blindly to tackle this unit-mix dilemma and trying to reinvent the wheel, though, let's try to learn from the mistakes of others.
|Unit-Mix Percentages Based on Type of Customer Base|
|Size||Apt./Condo/Twnhse.||Military/Com./High-income Sq. Footage||Univ./ Manuf. Housing/Mid-Income Sq. Footage|
|5-by-5||10 %||5 %||10 %|
|5-by-10||25 %||20 %||25 %|
|10-by-10||35 %||30 %||35 %|
|10-by-15||20 %||15 %||20 %|
|10-by-20||10 %||15 %||10 %|
|10-by-25||0 %||10 %||0 %|
Unit Mix Mistake No. 1
Here is where the common mistake is made of throwing your demographic homework in the trash and trying to please everyone by offering everything. Bad idea. Too many choices only serve to clutter your layout, increase the complexity of construction, hamper your ability to manage efficiently, and confuse your customer.
I know a man who decided to take the Henry Ford approach, which adheres to the notion that a car can be any color, as long as its black. In a similar vein, this man built a 300-unit facility consisting only of 10-by-10 units. His attitude was such that if someone needed a unit larger than a 10-by-10, they'd rent two. Furthermore, he didn't specify what a customer would do if they only needed a 5-by-5.
He built this project in 1988 in an area that had little or no competition to speak of, and he rented his units. Since then, other facilities have opened in the same area, offering a more standard fare of unit mix--a greater variety of sizes. Last I heard, this man was re-configuring some of his buildings.
Unit Mix Mistake No. 2
This configuration is known as the banker's mix. I don't believe that this mistake is as prevalent now as it was a few years back, mainly because the industry has matured to the point where a developer has to cater to his customer base or his project will fail. Earlier, when we could get away with the "If I build it, they will come" attitude, and the demand was such that the customer would take whatever we offered, we could dictate the mix to suit us. Or, in this case, the banker.
The theory behind the banker's mix was to increase the projected revenues of a project by including in your design a disproportionate number of small units, knowing that they command a higher-per-square-foot rent. The higher the projected revenue, the more viable a project would appear, and the easier it was to persuade the lender or investor to provide the financing.
Once again, this mistake meant ignoring your demographic research (if any was done at all) and plowing ahead with the wrong motive.
So, you have armed yourself with data concerning your potential customers. Now what? First, stop wringing your hands and read your data. Who will be your customers? Commercial, middle-income single family, higher-income single family, apartment/condo/manufactured-housing dwellers, military personnel or university students?
Based on your customer profiles, you can calculate--with reasonable accuracy--what mix to offer. Also, for reference, I offer the table below as a guideline based on my own experience and my study of the industry.
Be sure to establish the percentage of a particular type of customer before applying the above schedules. For example, if half of your customer base is apartment and condominium dwellers, and the other half is middle-income single family, then allocate half of your space to the percentages under the apartment column, and the other half to the percentages under the middle-income single-family column.
A quick note on climate-controlled space: Experience tells me that, save for the rare exception, all new facilities should offer climate control, even as much as 40 percent of your rentable space.
Doing It Right the First Time
The development of unit mix deserves the same level of serious research as your initial feasibility study. Make sure you plan wisely, investigating your customers needs for storage, long before the walls are in place. Reconfiguring can be a costly measure to rectifying mistakes that could have been avoided.
Finally, don't forget that you have a safety net available if you construct your project in phases. In other words, if you are already operating your first phase and are able to see which units rent the fastest, then you can customize your unit mix to fit your customer base. Plus, you can utilize the phasing concept of developing to help make a more accurate determination of how much space to devote to climate control.
Jim Killoran is the owner of LeManx Information Products. Based in Shelton, Wash., LeManx Information Products specializes in providing information to the self-storage industry. Mr. Killoran is also the author of Self Storage Success and Self Storage Startup. In addition, he has been in the self-storage business for 15 years and is co-owner of Freeway Mini Storage in Shelton, Wash. For more information or to order books, call (800) 764-1909, or write to LeManx Information Products, P.O. Box 542, Shelton, WA 98584-0542.