Inexperienced developers often think a site’s success is a sure bet if all competing self-storage facilities in a market are renting at or near capacity. Others think that if there are no climate-controlled facilities in a market, they’ll strike gold by building one. Potentially worst of all are those who have land they don’t know what to do with, and having heard self-storage is a cash cow, enter the industry hungrily.
It’s not a secret to even the casual observer of the self-storage industry that our business has matured and become increasingly competitive. The Self Storage Association recently reported approximately 2 billion square feet of self-storage existing in the United States. In addition, while it took roughly 23 years to develop the first billion square feet, the second billion popped up within the past seven years.
In light of statistics, we can no longer afford to assume unmet demand in a given market will last. Yet, our industry still offers incredible opportunities to enjoy one of the best businesses anywhere. The key is to choose your next development site with great care and research.
Site selection is the process of determining which markets will produce the greatest opportunity for profit and success, and than handpicking sites within a specific area. By having a superior location within a given submarket, a storage operator will be less prone to suffering competitive pressure.
Quality locations also produce large dividends when it comes time to sell a facility. Your site should be superior to those of the competition, highly visible and accessible. Most institutional investors favor businesses on major or arterial roads, knowing potential customers will drive by frequently. Find a site least vulnerable to future competition; seek out markets with limited land supply and stringent zoning codes to assure restricted development. Also, the presence of “credit-rated” or national retailers in the immediate market is highly desirable.
Investors pay premium prices for facilities in superior locations. The better the site and competitive position, the less risk for an investor. Moreover, the risk is directly related to the ability of a location to compete in the present and future.