For example, let’s envision a market with 300,000 square feet of self-storage supply in a 3-mile radius. If the market has an overall occupancy of 85 percent, then the current demand for self-storage is 255,000 square feet. If a developer plans to enter this same 3-mile radius with a new facility, consisting of another 60,000 square feet, then the new total supply of storage in this market would be 360,000 square feet. At the current demand of only 255,000 square feet, this new market would now be facing occupancy of around 70 percent, down nearly 15 percent from its stabilized rate!
It would take a tremendous amount of population growth or additional demand coming from outside the 3-mile radius to return this market back to 85 percent occupancy. What should concern all current owners most is the older, lower-quality facilities will likely suffer the worst decline because the new site—with all its bells and whistles—can draw customers from the competition.
Taking preventive action can make all the difference in how your facility weathers a changing market. We’ve developed an annual facility check-up list to accurately evaluate your operation against current and potential competitors. This evaluation, combined with your own valuable experience and knowledge, will give you tools to make informed decisions about how to remain competitive.
A word of caution: You must be completely objective when completing the evaluation and as thorough as possible in obtaining all details. Your results need to accurately reflect the market conditions to be useful to you.
A sample copy of the check-up form is included with this article to illustrate the analysis. If you would like a blank form, visit www.selfstorage.com/argus/toolbox/checkup.htm to download a copy. The form is merely a guide, so feel free to add other items to the list that affect your market.
To begin the checkup analysis, you need to define your market trade area, generally a 3- to 5-mile radius from your location. You may also want to include additional facilities just outside this area as they have the potential to impact your market.
Plotting all of the self-storage businesses in the area on a map will give you a good idea of market supply and what areas are likely to see future self-storage development. Visit your local planning and building department to inquire about projects on the drawing board; they could play a major role in the future success of your business. Add these locations to your list and then commence your evaluation by visiting all the facilities. Talk with the manager or owner at each location to learn as much as you can about their operations and how they market to potential renters.